I 

112TH CONGRESS 

1ST SESSION H. R. 3682 

To repeal the Patient Protection and Affordable Care Act and provide for 

comprehensive health reform, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 15, 2011 

Mr. DUFFY introduced the following bill; which was referred to the Committee 

on Energy and Commerce, and in addition to the Committees on Ways 

and Means, Education and the Workforce, the Judiciary, Natural Resources, House Administration, Rules, and Appropriations, for a period 

to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee 

concerned 

A BILL 

To repeal the Patient Protection and Affordable Care Act 

and provide for comprehensive health reform, and for 

other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Patient Centered Healthcare Savings Act of 2011’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows: 


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Sec. 1. Short title; table of contents. 

TITLE I—REPEALING OF PPACA 

Sec. 101. Repeal of the health care reform package. 

TITLE II—MEDICAL LIABILITY REFORM 

Sec. 201. Findings and purpose. 

Sec. 202. Encouraging speedy resolution of claims. 

Sec. 203. Compensating patient injury. 

Sec. 204. Maximizing patient recovery. 

Sec. 205. Punitive damages. 

Sec. 206. Authorization of payment of future damages to claimants in 

HEALTH care lawsuits. 

Sec. 207. Definitions. 

Sec. 208. Effect on other laws. 

Sec. 209. State flexibility and protection of States’ rights. 

Sec. 210. Applicability; effective date. 

TITLE III—ALLOWING PEOPLE TO PURCHASE HEALTH 

INSURANCE ACROSS STATE LINES 

Sec. 301. Specification of constitutional authority for enactment of law. 

Sec. 302. Findings. 

Sec. 303. Cooperative governing of individual health insurance coverage. 

Sec. 304. Severability. 

TITLE IV—INCREASING TRANSPARENCY AND COMPETITION IN 

HEALTHCARE 

Sec. 401. Access to Medicare data to improve transparency. 

TITLE V—EXPANDING THE EFFECTIVENESS OF HEALTH 

SAVINGS ACCOUNTS 

Sec. 501. Amendment of 1986 Code. 

Subtitle A—Provisions Relating to Tax-Preferred Health Accounts 

Sec. 511. Allow both spouses to make catch-up contributions to the same HSA 

account. 

Sec. 512. Provisions relating to Medicare. 

Sec. 513. Individuals eligible for veterans benefits for a service-connected disability. 

Sec. 514. Individuals eligible for Indian Health Service assistance. 

Sec. 515. Individuals eligible for TRICARE coverage. 

Sec. 516. Health FSA carryforwards. 

Sec. 517. FSA and HRA interaction with HSAs. 

Sec. 518. Allowance of distributions for prescription and over-the-counter medicines and drugs. 

Sec. 519. Purchase of health insurance from HSA account. 

Sec. 520. Special rule for certain medical expenses incurred before establishment of account. 

Sec. 521. Preventive care prescription drug clarification. 

Sec. 522. Equivalent bankruptcy protections for health savings accounts as retirement funds. 

Sec. 523. Administrative error correction before due date of return. 


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Sec. 524. Reauthorization of medicaid health opportunity accounts. 

Subtitle B—Other Provisions 

Sec. 531. Certain exercise equipment and physical fitness programs treated as 

medical care. 

Sec. 532. Certain nutritional and dietary supplements to be treated as medical 

care. 

Sec. 533. Certain provider fees to be treated as medical care. 

TITLE VI—COVERING PEOPLE WITH PRE-EXISTING CONDITIONS, 

REMOVING ANNUAL AND LIFETIME COVERAGE CAPS, AND EXPANDING ACCESS TO CARE 

Subtitle A—Making Health Care Coverage Affordable for Every American 

CHAPTER 1—ENSURING COVERAGE FOR INDIVIDUALS WITH PREEXISTING

CONDITIONS AND MULTIPLE HEALTH CARE NEEDS

Sec. 601. Establish universal access programs to improve high risk pools and 

reinsurance markets. 

Sec. 602. Elimination of certain requirements for guaranteed availability in individual market. 

Sec. 603. No annual or lifetime spending caps. 

Sec. 604. Preventing unjust cancellation of insurance coverage. 

CHAPTER 2—REDUCING HEALTH CARE PREMIUMS AND THE NUMBER OF

UNINSURED AMERICANS

Sec. 611. State innovation programs. 

Sec. 612. Health plan finders. 

Sec. 613. Administrative simplification. 

Subtitle B—Improving Access to Health Care 

CHAPTER 1—EXPANDING ACCESS AND LOWERING COSTS FOR SMALL

BUSINESSES

Sec. 620. Short title. 

Sec. 621. Rules governing association health plans. 

Sec. 622. Clarification of treatment of single employer arrangements. 

Sec. 623. Enforcement provisions relating to association health plans. 

Sec. 624. Cooperation between Federal and State authorities. 

Sec. 625. Effective date and transitional and other rules. 

CHAPTER 2—TARGETED EFFORTS TO EXPAND ACCESS

Sec. 631. Extending coverage of dependents. 

Sec. 632. Allowing auto-enrollment for employer sponsored coverage. 

TITLE VII—STOPPING MEDICARE, WASTE, FRAUD, AND ABUSE 

AND INCREASING PENALTIES FOR ABUSERS 

Sec. 701. Increased civil money penalties and criminal fines for Medicare fraud 

and abuse. 

Sec. 702. Increased sentences for felonies involving Medicare fraud and abuse. 

Sec. 703. Other DME supplier anti-fraud and abuse provisions. 

Sec. 704. Retention of certain fraud and abuse provisions. 


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Sec. 705. Ensuring timely enforcement of Medicare secondary payer requirements in liability cases. 

1 TITLE I—REPEALING OF PPACA 

2 SEC. 101. REPEAL OF THE HEALTH CARE REFORM PACK3 AGE. 

4 (a) PPACA.—The Patient Protection and Affordable 

5 Care Act is repealed, and the provisions of law amended 

6 or repealed by such Act are restored or revived as if such 

7 Act had not been enacted. 

8 (b) HCERA.—Title I and subtitle B of title II of the 

9 Health Care and Education Reconciliation Act of 2010 are 

10 repealed, and the provisions of law amended or repealed 

11 by such title or subtitle are restored or revived as if such 

12 title or subtitle had not been enacted. 

13 TITLE II—MEDICAL LIABILITY 

14 REFORM 

15 SEC. 201. FINDINGS AND PURPOSE. 

16 (a) FINDINGS.— 

17 (1) EFFECT ON HEALTH CARE ACCESS AND

18 COSTS.—Congress finds that our current civil justice 

19 system is adversely affecting patient access to health 

20 care services, better patient care, and cost-efficient 

21 health care, in that the health care liability system 

22 is a costly and ineffective mechanism for resolving 

23 claims of health care liability and compensating in24 jured patients, and is a deterrent to the sharing of 


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1 information among health care professionals which 

2 impedes efforts to improve patient safety and quality 

3 of care. 

4 (2) EFFECT ON INTERSTATE COMMERCE.— 

5 Congress finds that the health care and insurance 

6 industries are industries affecting interstate com7 merce and the health care liability litigation systems 

8 existing throughout the United States are activities 

9 that affect interstate commerce by contributing to 

10 the high costs of health care and premiums for 

11 health care liability insurance purchased by health 

12 care system providers. 

13 (3) EFFECT ON FEDERAL SPENDING.—Con14 gress finds that the health care liability litigation 

15 systems existing throughout the United States have 

16 a significant effect on the amount, distribution, and 

17 use of Federal funds because of— 

18 (A) the large number of individuals who 

19 receive health care benefits under programs op20 erated or financed by the Federal Government; 

21 (B) the large number of individuals who 

22 benefit because of the exclusion from Federal 

23 taxes of the amounts spent to provide them 

24 with health insurance benefits; and 


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1 (C) the large number of health care pro2 viders who provide items or services for which 

3 the Federal Government makes payments. 

4 (b) PURPOSE.—It is the purpose of this title to imple5 ment reasonable, comprehensive, and effective health care 

6 liability reforms designed to— 

7 (1) improve the availability of health care serv8 ices in cases in which health care liability actions 

9 have been shown to be a factor in the decreased 

10 availability of services; 

11 (2) reduce the incidence of ‘‘defensive medi12 cine’’ and lower the cost of health care liability in13 surance, all of which contribute to the escalation of 

14 health care costs; 

15 (3) ensure that persons with meritorious health 

16 care injury claims receive fair and adequate com17 pensation, including reasonable noneconomic dam18 ages; 

19 (4) improve the fairness and cost-effectiveness 

20 of our current health care liability system to resolve 

21 disputes over, and provide compensation for, health 

22 care liability by reducing uncertainty in the amount 

23 of compensation provided to injured individuals; and 


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1 (5) provide an increased sharing of information 

2 in the health care system which will reduce unin3 tended injury and improve patient care. 

4 SEC. 202. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS. 

5 The time for the commencement of a health care law6 suit shall be 3 years after the date of manifestation of 

7 injury or 1 year after the claimant discovers, or through 

8 the use of reasonable diligence should have discovered, the 

9 injury, whichever occurs first. In no event shall the time 

10 for commencement of a health care lawsuit exceed 3 years 

11 after the date of manifestation of injury unless tolled for 

12 any of the following— 

13 (1) upon proof of fraud; 

14 (2) intentional concealment; or 

15 (3) the presence of a foreign body, which has no 

16 therapeutic or diagnostic purpose or effect, in the 

17 person of the injured person. 

18 Actions by a minor shall be commenced within 3 years 

19 from the date of the alleged manifestation of injury except 

20 that actions by a minor under the full age of 6 years shall 

21 be commenced within 3 years of manifestation of injury 

22 or prior to the minor’s 8th birthday, whichever provides 

23 a longer period. Such time limitation shall be tolled for 

24 minors for any period during which a parent or guardian 

25 and a health care provider or health care organization 


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1 have committed fraud or collusion in the failure to bring 

2 an action on behalf of the injured minor. 

3 SEC. 203. COMPENSATING PATIENT INJURY. 

4 (a) UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL

5 ECONOMIC LOSSES IN HEALTH CARE LAWSUITS.—In any 

6 health care lawsuit, nothing in this title shall limit a claim7 ant’s recovery of the full amount of the available economic 

8 damages, notwithstanding the limitation in subsection (b). 

9 (b) ADDITIONAL NONECONOMIC DAMAGES.—In any 

10 health care lawsuit, the amount of noneconomic damages, 

11 if available, may be as much as $250,000, regardless of 

12 the number of parties against whom the action is brought 

13 or the number of separate claims or actions brought with 

14 respect to the same injury. 

15 (c) NO DISCOUNT OF AWARD FOR NONECONOMIC

16 DAMAGES.—For purposes of applying the limitation in 

17 subsection (b), future noneconomic damages shall not be 

18 discounted to present value. The jury shall not be in19 formed about the maximum award for noneconomic dam20 ages. An award for noneconomic damages in excess of 

21 $250,000 shall be reduced either before the entry of judg22 ment, or by amendment of the judgment after entry of 

23 judgment, and such reduction shall be made before ac24 counting for any other reduction in damages required by 

25 law. If separate awards are rendered for past and future 


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1 noneconomic damages and the combined awards exceed 

2 $250,000, the future noneconomic damages shall be re3 duced first. 

4 (d) FAIR SHARE RULE.—In any health care lawsuit, 

5 each party shall be liable for that party’s several share 

6 of any damages only and not for the share of any other 

7 person. Each party shall be liable only for the amount of 

8 damages allocated to such party in direct proportion to 

9 such party’s percentage of responsibility. Whenever a 

10 judgment of liability is rendered as to any party, a sepa11 rate judgment shall be rendered against each such party 

12 for the amount allocated to such party. For purposes of 

13 this section, the trier of fact shall determine the propor14 tion of responsibility of each party for the claimant’s 

15 harm. 

16 SEC. 204. MAXIMIZING PATIENT RECOVERY. 

17 (a) COURT SUPERVISION OF SHARE OF DAMAGES

18 ACTUALLY PAID TO CLAIMANTS.—In any health care law19 suit, the court shall supervise the arrangements for pay20 ment of damages to protect against conflicts of interest 

21 that may have the effect of reducing the amount of dam22 ages awarded that are actually paid to claimants. In par23 ticular, in any health care lawsuit in which the attorney 

24 for a party claims a financial stake in the outcome by vir25 tue of a contingent fee, the court shall have the power 


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1 to restrict the payment of a claimant’s damage recovery 

2 to such attorney, and to redirect such damages to the 

3 claimant based upon the interests of justice and principles 

4 of equity. In no event shall the total of all contingent fees 

5 for representing all claimants in a health care lawsuit ex6 ceed the following limits: 

7 (1) Forty percent of the first $50,000 recovered 

8 by the claimant(s). 

9 (2) Thirty-three and one-third percent of the 

10 next $50,000 recovered by the claimant(s). 

11 (3) Twenty-five percent of the next $500,000 

12 recovered by the claimant(s). 

13 (4) Fifteen percent of any amount by which the 

14 recovery by the claimant(s) is in excess of $600,000. 

15 (b) APPLICABILITY.—The limitations in this section 

16 shall apply whether the recovery is by judgment, settle17 ment, mediation, arbitration, or any other form of alter18 native dispute resolution. In a health care lawsuit involv19 ing a minor or incompetent person, a court retains the 

20 authority to authorize or approve a fee that is less than 

21 the maximum permitted under this section. The require22 ment for court supervision in the first two sentences of 

23 subsection (a) applies only in civil actions. 


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1 SEC. 205. PUNITIVE DAMAGES. 

2 (a) IN GENERAL.—Punitive damages may, if other3 wise permitted by applicable State or Federal law, be 

4 awarded against any person in a health care lawsuit only 

5 if it is proven by clear and convincing evidence that such 

6 person acted with malicious intent to injure the claimant, 

7 or that such person deliberately failed to avoid unneces8 sary injury that such person knew the claimant was sub9 stantially certain to suffer. In any health care lawsuit 

10 where no judgment for compensatory damages is rendered 

11 against such person, no punitive damages may be awarded 

12 with respect to the claim in such lawsuit. No demand for 

13 punitive damages shall be included in a health care lawsuit 

14 as initially filed. A court may allow a claimant to file an 

15 amended pleading for punitive damages only upon a mo16 tion by the claimant and after a finding by the court, upon 

17 review of supporting and opposing affidavits or after a 

18 hearing, after weighing the evidence, that the claimant has 

19 established by a substantial probability that the claimant 

20 will prevail on the claim for punitive damages. At the re21 quest of any party in a health care lawsuit, the trier of 

22 fact shall consider in a separate proceeding— 

23 (1) whether punitive damages are to be award24 ed and the amount of such award; and 

25 (2) the amount of punitive damages following a 

26 determination of punitive liability. 


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1 If a separate proceeding is requested, evidence relevant 

2 only to the claim for punitive damages, as determined by 

3 applicable State law, shall be inadmissible in any pro4 ceeding to determine whether compensatory damages are 

5 to be awarded. 

6 (b) DETERMINING AMOUNT OF PUNITIVE DAM7 AGES.— 

8 (1) FACTORS CONSIDERED.—In determining 

9 the amount of punitive damages, if awarded, in a 

10 health care lawsuit, the trier of fact shall consider 

11 only the following— 

12 (A) the severity of the harm caused by the 

13 conduct of such party; 

14 (B) the duration of the conduct or any 

15 concealment of it by such party; 

16 (C) the profitability of the conduct to such 

17 party; 

18 (D) the number of products sold or med19 ical procedures rendered for compensation, as 

20 the case may be, by such party, of the kind 

21 causing the harm complained of by the claim22 ant; 

23 (E) any criminal penalties imposed on such 

24 party, as a result of the conduct complained of 

25 by the claimant; and 


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1 (F) the amount of any civil fines assessed 

2 against such party as a result of the conduct 

3 complained of by the claimant. 

4 (2) MAXIMUM AWARD.—The amount of punitive 

5 damages, if awarded, in a health care lawsuit may 

6 be as much as $250,000 or as much as two times 

7 the amount of economic damages awarded, which8 ever is greater. The jury shall not be informed of 

9 this limitation. 

10 (c) NO PUNITIVE DAMAGES FOR PRODUCTS THAT

11 COMPLY WITH FDA STANDARDS.— 

12 (1) IN GENERAL.— 

13 (A) No punitive damages may be awarded 

14 against the manufacturer or distributor of a 

15 medical product, or a supplier of any compo16 nent or raw material of such medical product, 

17 based on a claim that such product caused the 

18 claimant’s harm where— 

19 (i)(I) such medical product was sub20 ject to premarket approval, clearance, or li21 censure by the Food and Drug Administra22 tion with respect to the safety of the for23 mulation or performance of the aspect of 

24 such medical product which caused the 

25 claimant’s harm or the adequacy of the 


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1 packaging or labeling of such medical 

2 product; and 

3 (II) such medical product was so ap4 proved, cleared, or licensed; or 

5 (ii) such medical product is generally 

6 recognized among qualified experts as safe 

7 and effective pursuant to conditions estab8 lished by the Food and Drug Administra9 tion and applicable Food and Drug Admin10 istration regulations, including without 

11 limitation those related to packaging and 

12 labeling, unless the Food and Drug Admin13 istration has determined that such medical 

14 product was not manufactured or distrib15 uted in substantial compliance with appli16 cable Food and Drug Administration stat17 utes and regulations. 

18 (B) RULE OF CONSTRUCTION.—Subpara19 graph (A) may not be construed as establishing 

20 the obligation of the Food and Drug Adminis21 tration to demonstrate affirmatively that a 

22 manufacturer, distributor, or supplier referred 

23 to in such subparagraph meets any of the con24 ditions described in such subparagraph. 


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1 (2) LIABILITY OF HEALTH CARE PROVIDERS.— 

2 A health care provider who prescribes, or who dis3 penses pursuant to a prescription, a medical product 

4 approved, licensed, or cleared by the Food and Drug 

5 Administration shall not be named as a party to a 

6 product liability lawsuit involving such product and 

7 shall not be liable to a claimant in a class action 

8 lawsuit against the manufacturer, distributor, or 

9 seller of such product. Nothing in this paragraph 

10 prevents a court from consolidating cases involving 

11 health care providers and cases involving products li12 ability claims against the manufacturer, distributor, 

13 or product seller of such medical product. 

14 (3) PACKAGING.—In a health care lawsuit for 

15 harm which is alleged to relate to the adequacy of 

16 the packaging or labeling of a drug which is required 

17 to have tamper-resistant packaging under regula18 tions of the Secretary of Health and Human Serv19 ices (including labeling regulations related to such 

20 packaging), the manufacturer or product seller of 

21 the drug shall not be held liable for punitive dam22 ages unless such packaging or labeling is found by 

23 the trier of fact by clear and convincing evidence to 

24 be substantially out of compliance with such regula25 tions. 


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1 (4) EXCEPTION.—Paragraph (1) shall not 

2 apply in any health care lawsuit in which— 

3 (A) a person, before or after premarket ap4 proval, clearance, or licensure of such medical 

5 product, knowingly misrepresented to or with6 held from the Food and Drug Administration 

7 information that is required to be submitted 

8 under the Federal Food, Drug, and Cosmetic 

9 Act (21 U.S.C. 301 et seq.) or section 351 of 

10 the Public Health Service Act (42 U.S.C. 262) 

11 that is material and is causally related to the 

12 harm which the claimant allegedly suffered; or 

13 (B) a person made an illegal payment to 

14 an official of the Food and Drug Administra15 tion for the purpose of either securing or main16 taining approval, clearance, or licensure of such 

17 medical product. 

18 SEC. 206. AUTHORIZATION OF PAYMENT OF FUTURE DAM19 AGES TO CLAIMANTS IN HEALTH CARE LAW20 SUITS. 

21 (a) IN GENERAL.—In any health care lawsuit, if an 

22 award of future damages, without reduction to present 

23 value, equaling or exceeding $50,000 is made against a 

24 party with sufficient insurance or other assets to fund a 

25 periodic payment of such a judgment, the court shall, at 


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1 the request of any party, enter a judgment ordering that 

2 the future damages be paid by periodic payments, in ac3 cordance with the Uniform Periodic Payment of Judg4 ments Act promulgated by the National Conference of 

5 Commissioners on Uniform State Laws. 

6 (b) APPLICABILITY.—This section applies to all ac7 tions which have not been first set for trial or retrial be8 fore the effective date of this Act. 

9 SEC. 207. DEFINITIONS. 

10 In this title: 

11 (1) ALTERNATIVE DISPUTE RESOLUTION SYS12 TEM; ADR.—The term ‘‘alternative dispute resolution 

13 system’’ or ‘‘ADR’’ means a system that provides 

14 for the resolution of health care lawsuits in a man15 ner other than through a civil action brought in a 

16 State or Federal court. 

17 (2) CLAIMANT.—The term ‘‘claimant’’ means 

18 any person who brings a health care lawsuit, includ19 ing a person who asserts or claims a right to legal 

20 or equitable contribution, indemnity, or subrogation, 

21 arising out of a health care liability claim or action, 

22 and any person on whose behalf such a claim is as23 serted or such an action is brought, whether de24 ceased, incompetent, or a minor. 


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1 (3) COMPENSATORY DAMAGES.—The term 

2 ‘‘compensatory damages’’ means objectively 

3 verifiable monetary losses incurred as a result of the 

4 provision of, use of, or payment for (or failure to 

5 provide, use, or pay for) health care services or med6 ical products, such as past and future medical ex7 penses, loss of past and future earnings, cost of ob8 taining domestic services, loss of employment, and 

9 loss of business or employment opportunities, dam10 ages for physical and emotional pain, suffering, in11 convenience, physical impairment, mental anguish, 

12 disfigurement, loss of enjoyment of life, loss of soci13 ety and companionship, loss of consortium (other 

14 than loss of domestic service), hedonic damages, in15 jury to reputation, and all other nonpecuniary losses 

16 of any kind or nature. The term ‘‘compensatory 

17 damages’’ includes economic damages and non18 economic damages, as such terms are defined in this 

19 section. 

20 (4) CONTINGENT FEE.—The term ‘‘contingent 

21 fee’’ includes all compensation to any person or per22 sons which is payable only if a recovery is effected 

23 on behalf of one or more claimants. 

24 (5) ECONOMIC DAMAGES.—The term ‘‘economic 

25 damages’’ means objectively verifiable monetary 


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1 losses incurred as a result of the provision of, use 

2 of, or payment for (or failure to provide, use, or pay 

3 for) health care services or medical products, such as 

4 past and future medical expenses, loss of past and 

5 future earnings, cost of obtaining domestic services, 

6 loss of employment, and loss of business or employ7 ment opportunities. 

8 (6) HEALTH CARE LAWSUIT.—The term 

9 ‘‘health care lawsuit’’ means any health care liability 

10 claim concerning the provision of health care goods 

11 or services or any medical product affecting inter12 state commerce, or any health care liability action 

13 concerning the provision of health care goods or 

14 services or any medical product affecting interstate 

15 commerce, brought in a State or Federal court or 

16 pursuant to an alternative dispute resolution system, 

17 against a health care provider, a health care organi18 zation, or the manufacturer, distributor, supplier, 

19 marketer, promoter, or seller of a medical product, 

20 regardless of the theory of liability on which the 

21 claim is based, or the number of claimants, plain22 tiffs, defendants, or other parties, or the number of 

23 claims or causes of action, in which the claimant al24 leges a health care liability claim. Such term does 

25 not include a claim or action which is based on 


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1 criminal liability; which seeks civil fines or penalties 

2 paid to Federal, State, or local government; or which 

3 is grounded in antitrust. 

4 (7) HEALTH CARE LIABILITY ACTION.—The 

5 term ‘‘health care liability action’’ means a civil ac6 tion brought in a State or Federal court or pursuant 

7 to an alternative dispute resolution system, against 

8 a health care provider, a health care organization, or 

9 the manufacturer, distributor, supplier, marketer, 

10 promoter, or seller of a medical product, regardless 

11 of the theory of liability on which the claim is based, 

12 or the number of plaintiffs, defendants, or other par13 ties, or the number of causes of action, in which the 

14 claimant alleges a health care liability claim. 

15 (8) HEALTH CARE LIABILITY CLAIM.—The 

16 term ‘‘health care liability claim’’ means a demand 

17 by any person, whether or not pursuant to ADR, 

18 against a health care provider, health care organiza19 tion, or the manufacturer, distributor, supplier, mar20 keter, promoter, or seller of a medical product, in21 cluding, but not limited to, third-party claims, cross22 claims, counter-claims, or contribution claims, which 

23 are based upon the provision of, use of, or payment 

24 for (or the failure to provide, use, or pay for) health 

25 care services or medical products, regardless of the 


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1 theory of liability on which the claim is based, or the 

2 number of plaintiffs, defendants, or other parties, or 

3 the number of causes of action. 

4 (9) HEALTH CARE ORGANIZATION.—The term 

5 ‘‘health care organization’’ means any person or en6 tity which is obligated to provide or pay for health 

7 benefits under any health plan, including any person 

8 or entity acting under a contract or arrangement 

9 with a health care organization to provide or admin10 ister any health benefit. 

11 (10) HEALTH CARE PROVIDER.—The term 

12 ‘‘health care provider’’ means any person or entity 

13 required by State or Federal laws or regulations to 

14 be licensed, registered, or certified to provide health 

15 care services, and being either so licensed, reg16 istered, or certified, or exempted from such require17 ment by other statute or regulation. 

18 (11) HEALTH CARE GOODS OR SERVICES.—The 

19 term ‘‘health care goods or services’’ means any 

20 goods or services provided by a health care organiza21 tion, provider, or by any individual working under 

22 the supervision of a health care provider, that relates 

23 to the diagnosis, prevention, or treatment of any 

24 human disease or impairment, or the assessment or 

25 care of the health of human beings. 


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1 (12) MALICIOUS INTENT TO INJURE.—The 

2 term ‘‘malicious intent to injure’’ means inten3 tionally causing or attempting to cause physical in4 jury other than providing health care goods or serv5 ices. 

6 (13) MEDICAL PRODUCT.—The term ‘‘medical 

7 product’’ means a drug, device, or biological product 

8 intended for humans, and the terms ‘‘drug’’, ‘‘de9 vice’’, and ‘‘biological product’’ have the meanings 

10 given such terms in sections 201(g)(1) and 201(h) 

11 of the Federal Food, Drug and Cosmetic Act (21 

12 U.S.C. 321(g)(1) and (h)) and section 351(a) of the 

13 Public Health Service Act (42 U.S.C. 262(a)), re14 spectively, including any component or raw material 

15 used therein, but excluding health care services. 

16 (14) NONECONOMIC DAMAGES.—The term 

17 ‘‘noneconomic damages’’ means damages for phys18 ical and emotional pain, suffering, inconvenience, 

19 physical impairment, mental anguish, disfigurement, 

20 loss of enjoyment of life, loss of society and compan21 ionship, loss of consortium (other than loss of do22 mestic service), hedonic damages, injury to reputa23 tion, and all other nonpecuniary losses of any kind 

24 or nature. 


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1 (15) PUNITIVE DAMAGES.—The term ‘‘punitive 

2 damages’’ means damages awarded, for the purpose 

3 of punishment or deterrence, and not solely for com4 pensatory purposes, against a health care provider, 

5 health care organization, or a manufacturer, dis6 tributor, or supplier of a medical product. Punitive 

7 damages are neither economic nor noneconomic 

8 damages. 

9 (16) RECOVERY.—The term ‘‘recovery’’ means 

10 the net sum recovered after deducting any disburse11 ments or costs incurred in connection with prosecu12 tion or settlement of the claim, including all costs 

13 paid or advanced by any person. Costs of health care 

14 incurred by the plaintiff and the attorneys’ office 

15 overhead costs or charges for legal services are not 

16 deductible disbursements or costs for such purpose. 

17 (17) STATE.—The term ‘‘State’’ means each of 

18 the several States, the District of Columbia, the 

19 Commonwealth of Puerto Rico, the Virgin Islands, 

20 Guam, American Samoa, the Northern Mariana Is21 lands, the Trust Territory of the Pacific Islands, and 

22 any other territory or possession of the United 

23 States, or any political subdivision thereof. 

24 SEC. 208. EFFECT ON OTHER LAWS. 

25 (a) VACCINE INJURY.— 


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1 (1) To the extent that title XXI of the Public 

2 Health Service Act establishes a Federal rule of law 

3 applicable to a civil action brought for a vaccine-re4 lated injury or death— 

5 (A) this title does not affect the application 

6 of the rule of law to such an action; and 

7 (B) any rule of law prescribed by this title 

8 in conflict with a rule of law of such title XXI 

9 shall not apply to such action. 

10 (2) If there is an aspect of a civil action 

11 brought for a vaccine-related injury or death to 

12 which a Federal rule of law under title XXI of the 

13 Public Health Service Act does not apply, then this 

14 title or otherwise applicable law (as determined 

15 under this title) will apply to such aspect of such ac16 tion. 

17 (b) OTHER FEDERAL LAW.—Except as provided in 

18 this section, nothing in this title shall be deemed to affect 

19 any defense available to a defendant in a health care law20 suit or action under any other provision of Federal law. 

21 SEC. 209. STATE FLEXIBILITY AND PROTECTION OF 

22 STATES’ RIGHTS. 

23 (a) HEALTH CARE LAWSUITS.—The provisions gov24 erning health care lawsuits set forth in this title preempt, 

25 subject to subsections (b) and (c), State law to the extent 


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1 that State law prevents the application of any provisions 

2 of law established by or under this title. The provisions 

3 governing health care lawsuits set forth in this title super4 sede chapter 171 of title 28, United States Code, to the 

5 extent that such chapter— 

6 (1) provides for a greater amount of damages 

7 or contingent fees, a longer period in which a health 

8 care lawsuit may be commenced, or a reduced appli9 cability or scope of periodic payment of future dam10 ages, than provided in this title; or 

11 (2) prohibits the introduction of evidence re12 garding collateral source benefits, or mandates or 

13 permits subrogation or a lien on collateral source 

14 benefits. 

15 (b) PROTECTION OF STATES’ RIGHTS AND OTHER

16 LAWS.—(1) Any issue that is not governed by any provi17 sion of law established by or under this title (including 

18 State standards of negligence) shall be governed by other19 wise applicable State or Federal law. 

20 (2) This title shall not preempt or supersede any 

21 State or Federal law that imposes greater procedural or 

22 substantive protections for health care providers and 

23 health care organizations from liability, loss, or damages 

24 than those provided by this title or create a cause of ac25 tion. 


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1 (c) STATE FLEXIBILITY.—No provision of this title 

2 shall be construed to preempt— 

3 (1) any State law (whether effective before, on, 

4 or after the date of the enactment of this Act) that 

5 specifies a particular monetary amount of compen6 satory or punitive damages (or the total amount of 

7 damages) that may be awarded in a health care law8 suit, regardless of whether such monetary amount is 

9 greater or lesser than is provided for under this title, 

10 notwithstanding section 204(a); or 

11 (2) any defense available to a party in a health 

12 care lawsuit under any other provision of State or 

13 Federal law. 

14 SEC. 210. APPLICABILITY; EFFECTIVE DATE. 

15 This title shall apply to any health care lawsuit 

16 brought in a Federal or State court, or subject to an alter17 native dispute resolution system, that is initiated on or 

18 after the date of the enactment of this Act, except that 

19 any health care lawsuit arising from an injury occurring 

20 prior to the date of the enactment of this Act shall be 

21 governed by the applicable statute of limitations provisions 

22 in effect at the time the injury occurred. 


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1 TITLE III—ALLOWING PEOPLE 

2 TO PURCHASE HEALTH IN3 SURANCE ACROSS STATE 

4 LINES 

5 SEC. 301. SPECIFICATION OF CONSTITUTIONAL AUTHORITY 

6 FOR ENACTMENT OF LAW. 

7 This title is enacted pursuant to the power granted 

8 Congress under article I, section 8, clause 3, of the United 

9 States Constitution. 

10 SEC. 302. FINDINGS. 

11 Congress finds the following: 

12 (1) The application of numerous and significant 

13 variations in State law and the implementation of 

14 the Patient Protection and Affordable Care Act im15 pacts the ability of insurers to offer, and individuals 

16 to obtain, affordable individual health insurance cov17 erage, thereby impeding commerce in individual 

18 health insurance coverage. 

19 (2) Mandates for health care coverage estab20 lished by title I of the Patient Protection and Af21 fordable Care Act will significantly elevate health in22 surance costs beyond State and Federal ability to 

23 pay. 

24 (3) Individual health insurance coverage is in25 creasingly offered through the Internet, other elecVerDate Mar 15 2010 23:44 Dec 22, 2011 Jkt 019200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\H3682.IH H3682

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1 tronic means, and by mail, all of which are inher2 ently part of interstate commerce. 

3 (4) In response to these issues, it is appropriate 

4 to encourage increased efficiency in the offering of 

5 individual health insurance coverage through a col6 laborative approach by the States in regulating this 

7 coverage. 

8 (5) The establishment of risk-retention groups 

9 has provided a successful model for the sale of insur10 ance across State lines, as the acts establishing 

11 those groups allow insurance to be sold in multiple 

12 States but regulated by a single State. 

13 SEC. 303. COOPERATIVE GOVERNING OF INDIVIDUAL 

14 HEALTH INSURANCE COVERAGE. 

15 (a) IN GENERAL.—Title XXVII of the Public Health 

16 Service Act (42 U.S.C. 300gg et seq.) is amended by add17 ing at the end the following new part: 

18 ‘‘PART D—COOPERATIVE GOVERNING OF 

19 INDIVIDUAL HEALTH INSURANCE COVERAGE 

20 ‘‘SEC. 2795. DEFINITIONS. 

21 ‘‘In this part: 

22 ‘‘(1) PRIMARY STATE.—The term ‘primary 

23 State’ means, with respect to individual health insur24 ance coverage offered by a health insurance issuer, 

25 the State designated by the issuer as the State 


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1 whose covered laws shall govern the health insurance 

2 issuer in the sale of such coverage under this part. 

3 An issuer, with respect to a particular policy, may 

4 only designate one such State as its primary State 

5 with respect to all such coverage it offers. Such an 

6 issuer may not change the designated primary State 

7 with respect to individual health insurance coverage 

8 once the policy is issued, except that such a change 

9 may be made upon renewal of the policy. With re10 spect to such designated State, the issuer is deemed 

11 to be doing business in that State. 

12 ‘‘(2) SECONDARY STATE.—The term ‘secondary 

13 State’ means, with respect to individual health insur14 ance coverage offered by a health insurance issuer, 

15 any State that is not the primary State. In the case 

16 of a health insurance issuer that is selling a policy 

17 in, or to a resident of, a secondary State, the issuer 

18 is deemed to be doing business in that secondary 

19 State. 

20 ‘‘(3) HEALTH INSURANCE ISSUER.—The term 

21 ‘health insurance issuer’ has the meaning given such 

22 term in section 2791(b)(2), except that such an 

23 issuer must be licensed in the primary State and be 

24 qualified to sell individual health insurance coverage 

25 in that State. 


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1 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV2 ERAGE.—The term ‘individual health insurance cov3 erage’ means health insurance coverage offered in 

4 the individual market, as defined in section 

5 2791(e)(1). 

6 ‘‘(5) APPLICABLE STATE AUTHORITY.—The 

7 term ‘applicable State authority’ means, with respect 

8 to a health insurance issuer in a State, the State in9 surance commissioner or official or officials des10 ignated by the State to enforce the requirements of 

11 this title for the State with respect to the issuer. 

12 ‘‘(6) HAZARDOUS FINANCIAL CONDITION.—The 

13 term ‘hazardous financial condition’ means that, 

14 based on its present or reasonably anticipated finan15 cial condition, a health insurance issuer is unlikely 

16 to be able— 

17 ‘‘(A) to meet obligations to policyholders 

18 with respect to known claims and reasonably 

19 anticipated claims; or 

20 ‘‘(B) to pay other obligations in the normal 

21 course of business. 

22 ‘‘(7) COVERED LAWS.— 

23 ‘‘(A) IN GENERAL.—The term ‘covered 

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1 ments, and orders governing the insurance busi2 ness pertaining to— 

3 ‘‘(i) individual health insurance cov4 erage issued by a health insurance issuer; 

5 ‘‘(ii) the offer, sale, rating (including 

6 medical underwriting), renewal, and 

7 issuance of individual health insurance cov8 erage to an individual; 

9 ‘‘(iii) the provision to an individual in 

10 relation to individual health insurance cov11 erage of health care and insurance related 

12 services; 

13 ‘‘(iv) the provision to an individual in 

14 relation to individual health insurance cov15 erage of management, operations, and in16 vestment activities of a health insurance 

17 issuer; and 

18 ‘‘(v) the provision to an individual in 

19 relation to individual health insurance cov20 erage of loss control and claims adminis21 tration for a health insurance issuer with 

22 respect to liability for which the issuer pro23 vides insurance. 

24 ‘‘(B) EXCEPTION.—Such term does not in25 clude any law, rule, regulation, agreement, or 


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1 order governing the use of care or cost manage2 ment techniques, including any requirement re3 lated to provider contracting, network access or 

4 adequacy, health care data collection, or quality 

5 assurance. 

6 ‘‘(8) STATE.—The term ‘State’ means the 50 

7 States and includes the District of Columbia, Puerto 

8 Rico, the Virgin Islands, Guam, American Samoa, 

9 and the Northern Mariana Islands. 

10 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC11 TICES.—The term ‘unfair claims settlement prac12 tices’ means only the following practices: 

13 ‘‘(A) Knowingly misrepresenting to claim14 ants and insured individuals relevant facts or 

15 policy provisions relating to coverage at issue. 

16 ‘‘(B) Failing to acknowledge with reason17 able promptness pertinent communications with 

18 respect to claims arising under policies. 

19 ‘‘(C) Failing to adopt and implement rea20 sonable standards for the prompt investigation 

21 and settlement of claims arising under policies. 

22 ‘‘(D) Failing to effectuate prompt, fair, 

23 and equitable settlement of claims submitted in 

24 which liability has become reasonably clear. 


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1 ‘‘(E) Refusing to pay claims without con2 ducting a reasonable investigation. 

3 ‘‘(F) Failing to affirm or deny coverage of 

4 claims within a reasonable period of time after 

5 having completed an investigation related to 

6 those claims. 

7 ‘‘(G) A pattern or practice of compelling 

8 insured individuals or their beneficiaries to in9 stitute suits to recover amounts due under its 

10 policies by offering substantially less than the 

11 amounts ultimately recovered in suits brought 

12 by them. 

13 ‘‘(H) A pattern or practice of attempting 

14 to settle or settling claims for less than the 

15 amount that a reasonable person would believe 

16 the insured individual or his or her beneficiary 

17 was entitled by reference to written or printed 

18 advertising material accompanying or made 

19 part of an application. 

20 ‘‘(I) Attempting to settle or settling claims 

21 on the basis of an application that was materi22 ally altered without notice to, or knowledge or 

23 consent of, the insured. 

24 ‘‘(J) Failing to provide forms necessary to 

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1 quests with reasonable explanations regarding 

2 their use. 

3 ‘‘(K) Attempting to cancel a policy in less 

4 time than that prescribed in the policy or by the 

5 law of the primary State. 

6 ‘‘(10) FRAUD AND ABUSE.—The term ‘fraud 

7 and abuse’ means an act or omission committed by 

8 a person who, knowingly and with intent to defraud, 

9 commits, or conceals any material information con10 cerning, one or more of the following: 

11 ‘‘(A) Presenting, causing to be presented 

12 or preparing with knowledge or belief that it 

13 will be presented to or by an insurer, a rein14 surer, broker or its agent, false information as 

15 part of, in support of or concerning a fact ma16 terial to one or more of the following: 

17 ‘‘(i) An application for the issuance or 

18 renewal of an insurance policy or reinsur19 ance contract. 

20 ‘‘(ii) The rating of an insurance policy 

21 or reinsurance contract. 

22 ‘‘(iii) A claim for payment or benefit 

23 pursuant to an insurance policy or reinsur24 ance contract. 


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1 ‘‘(iv) Premiums paid on an insurance 

2 policy or reinsurance contract. 

3 ‘‘(v) Payments made in accordance 

4 with the terms of an insurance policy or 

5 reinsurance contract. 

6 ‘‘(vi) A document filed with the com7 missioner or the chief insurance regulatory 

8 official of another jurisdiction. 

9 ‘‘(vii) The financial condition of an in10 surer or reinsurer. 

11 ‘‘(viii) The formation, acquisition, 

12 merger, reconsolidation, dissolution or 

13 withdrawal from one or more lines of in14 surance or reinsurance in all or part of a 

15 State by an insurer or reinsurer. 

16 ‘‘(ix) The issuance of written evidence 

17 of insurance. 

18 ‘‘(x) The reinstatement of an insur19 ance policy. 

20 ‘‘(B) Solicitation or acceptance of new or 

21 renewal insurance risks on behalf of an insurer 

22 reinsurer or other person engaged in the busi23 ness of insurance by a person who knows or 

24 should know that the insurer or other person 


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1 responsible for the risk is insolvent at the time 

2 of the transaction. 

3 ‘‘(C) Transaction of the business of insur4 ance in violation of laws requiring a license, cer5 tificate of authority or other legal authority for 

6 the transaction of the business of insurance. 

7 ‘‘(D) Attempt to commit, aiding or abet8 ting in the commission of, or conspiracy to com9 mit the acts or omissions specified in this para10 graph. 

11 ‘‘SEC. 2796. APPLICATION OF LAW. 

12 ‘‘(a) IN GENERAL.—The covered laws of the primary 

13 State shall apply to individual health insurance coverage 

14 offered by a health insurance issuer in the primary State 

15 and in any secondary State, but only if the coverage and 

16 issuer comply with the conditions of this section with re17 spect to the offering of coverage in any secondary State. 

18 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC19 ONDARY STATE.—Except as provided in this section, a 

20 health insurance issuer with respect to its offer, sale, rat21 ing (including medical underwriting), renewal, and 

22 issuance of individual health insurance coverage in any 

23 secondary State is exempt from any covered laws of the 

24 secondary State (and any rules, regulations, agreements, 


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1 or orders sought or issued by such State under or related 

2 to such covered laws) to the extent that such laws would— 

3 ‘‘(1) make unlawful, or regulate, directly or in4 directly, the operation of the health insurance issuer 

5 operating in the secondary State, except that any 

6 secondary State may require such an issuer— 

7 ‘‘(A) to pay, on a nondiscriminatory basis, 

8 applicable premium and other taxes (including 

9 high risk pool assessments) which are levied on 

10 insurers and surplus lines insurers, brokers, or 

11 policyholders under the laws of the State; 

12 ‘‘(B) to register with and designate the 

13 State insurance commissioner as its agent solely 

14 for the purpose of receiving service of legal doc15 uments or process; 

16 ‘‘(C) to submit to an examination of its fi17 nancial condition by the State insurance com18 missioner in any State in which the issuer is 

19 doing business to determine the issuer’s finan20 cial condition, if— 

21 ‘‘(i) the State insurance commissioner 

22 of the primary State has not done an ex23 amination within the period recommended 

24 by the National Association of Insurance 

25 Commissioners; and 


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1 ‘‘(ii) any such examination is con2 ducted in accordance with the examiners’ 

3 handbook of the National Association of 

4 Insurance Commissioners and is coordi5 nated to avoid unjustified duplication and 

6 unjustified repetition; 

7 ‘‘(D) to comply with a lawful order 

8 issued— 

9 ‘‘(i) in a delinquency proceeding com10 menced by the State insurance commis11 sioner if there has been a finding of finan12 cial impairment under subparagraph (C); 

13 or 

14 ‘‘(ii) in a voluntary dissolution pro15 ceeding; 

16 ‘‘(E) to comply with an injunction issued 

17 by a court of competent jurisdiction, upon a pe18 tition by the State insurance commissioner al19 leging that the issuer is in hazardous financial 

20 condition; 

21 ‘‘(F) to participate, on a nondiscriminatory 

22 basis, in any insurance insolvency guaranty as23 sociation or similar association to which a 

24 health insurance issuer in the State is required 

25 to belong; 


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1 ‘‘(G) to comply with any State law regard2 ing fraud and abuse (as defined in section 

3 2795(10)), except that if the State seeks an in4 junction regarding the conduct described in this 

5 subparagraph, such injunction must be obtained 

6 from a court of competent jurisdiction; 

7 ‘‘(H) to comply with any State law regard8 ing unfair claims settlement practices (as de9 fined in section 2795(9)); or 

10 ‘‘(I) to comply with the applicable require11 ments for independent review under section 

12 2798 with respect to coverage offered in the 

13 State; 

14 ‘‘(2) require any individual health insurance 

15 coverage issued by the issuer to be countersigned by 

16 an insurance agent or broker residing in that Sec17 ondary State; or 

18 ‘‘(3) otherwise discriminate against the issuer 

19 issuing insurance in both the primary State and in 

20 any secondary State. 

21 ‘‘(c) CLEAR AND CONSPICUOUS DISCLOSURE.—A 

22 health insurance issuer shall provide the following notice, 

23 in 12-point bold type, in any insurance coverage offered 

24 in a secondary State under this part by such a health in25 surance issuer and at renewal of the policy, with the 5 


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1 blank spaces therein being appropriately filled with the 

2 name of the health insurance issuer, the name of primary 

3 State, the name of the secondary State, the name of the 

4 secondary State, and the name of the secondary State, re5 spectively, for the coverage concerned: 

6 ‘‘ ‘NOTICE

7 ‘‘ ‘This policy is issued by lllll and is gov8 erned by the laws and regulations of the State of 

9 lllll, and it has met all the laws of that State as 

10 determined by that State’s Department of Insurance. This 

11 policy may be less expensive than others because it is not 

12 subject to all of the insurance laws and regulations of the 

13 State of lllll, including coverage of some services 

14 or benefits mandated by the law of the State of 

15 lllll. Additionally, this policy is not subject to all 

16 of the consumer protection laws or restrictions on rate 

17 changes of the State of lllll. As with all insurance 

18 products, before purchasing this policy, you should care19 fully review the policy and determine what health care 

20 services the policy covers and what benefits it provides, 

21 including any exclusions, limitations, or conditions for 

22 such services or benefits.’. 

23 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

24 AND PREMIUM INCREASES.— 


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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, a health insurance issuer that provides indi3 vidual health insurance coverage to an individual 

4 under this part in a primary or secondary State may 

5 not upon renewal— 

6 ‘‘(A) move or reclassify the individual in7 sured under the health insurance coverage from 

8 the class such individual is in at the time of 

9 issue of the contract based on the health-status 

10 related factors of the individual; or 

11 ‘‘(B) increase the premiums assessed the 

12 individual for such coverage based on a health 

13 status-related factor or change of a health sta14 tus-related factor or the past or prospective 

15 claim experience of the insured individual. 

16 ‘‘(2) CONSTRUCTION.—Nothing in paragraph 

17 (1) shall be construed to prohibit a health insurance 

18 issuer— 

19 ‘‘(A) from terminating or discontinuing 

20 coverage or a class of coverage in accordance 

21 with subsections (b) and (c) of section 2742; 

22 ‘‘(B) from raising premium rates for all 

23 policy holders within a class based on claims ex24 perience; 


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1 ‘‘(C) from changing premiums or offering 

2 discounted premiums to individuals who engage 

3 in wellness activities at intervals prescribed by 

4 the issuer, if such premium changes or incen5 tives— 

6 ‘‘(i) are disclosed to the consumer in 

7 the insurance contract; 

8 ‘‘(ii) are based on specific wellness ac9 tivities that are not applicable to all indi10 viduals; and 

11 ‘‘(iii) are not obtainable by all individ12 uals to whom coverage is offered; 

13 ‘‘(D) from reinstating lapsed coverage; or 

14 ‘‘(E) from retroactively adjusting the rates 

15 charged an insured individual if the initial rates 

16 were set based on material misrepresentation by 

17 the individual at the time of issue. 

18 ‘‘(e) PRIOR OFFERING OF POLICY IN PRIMARY

19 STATE.—A health insurance issuer may not offer for sale 

20 individual health insurance coverage in a secondary State 

21 unless that coverage is currently offered for sale in the 

22 primary State. 

23 ‘‘(f) LICENSING OF AGENTS OR BROKERS FOR

24 HEALTH INSURANCE ISSUERS.—Any State may require 

25 that a person acting, or offering to act, as an agent or 


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1 broker for a health insurance issuer with respect to the 

2 offering of individual health insurance coverage obtain a 

3 license from that State, with commissions or other com4 pensation subject to the provisions of the laws of that 

5 State, except that a State may not impose any qualifica6 tion or requirement which discriminates against a non7 resident agent or broker. 

8 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN9 SURANCE COMMISSIONER.—Each health insurance issuer 

10 issuing individual health insurance coverage in both pri11 mary and secondary States shall submit— 

12 ‘‘(1) to the insurance commissioner of each 

13 State in which it intends to offer such coverage, be14 fore it may offer individual health insurance cov15 erage in such State— 

16 ‘‘(A) a copy of the plan of operation or fea17 sibility study or any similar statement of the 

18 policy being offered and its coverage (which 

19 shall include the name of its primary State and 

20 its principal place of business); 

21 ‘‘(B) written notice of any change in its 

22 designation of its primary State; and 

23 ‘‘(C) written notice from the issuer of the 

24 issuer’s compliance with all the laws of the pri25 mary State; and 


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1 ‘‘(2) to the insurance commissioner of each sec2 ondary State in which it offers individual health in3 surance coverage, a copy of the issuer’s quarterly fi4 nancial statement submitted to the primary State, 

5 which statement shall be certified by an independent 

6 public accountant and contain a statement of opin7 ion on loss and loss adjustment expense reserves 

8 made by— 

9 ‘‘(A) a member of the American Academy 

10 of Actuaries; or 

11 ‘‘(B) a qualified loss reserve specialist. 

12 ‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.— 

13 Nothing in this section shall be construed to affect the 

14 authority of any Federal or State court to enjoin— 

15 ‘‘(1) the solicitation or sale of individual health 

16 insurance coverage by a health insurance issuer to 

17 any person or group who is not eligible for such in18 surance; or 

19 ‘‘(2) the solicitation or sale of individual health 

20 insurance coverage that violates the requirements of 

21 the law of a secondary State which are described in 

22 subparagraphs (A) through (H) of section 

23 2796(b)(1). 

24 ‘‘(i) POWER OF SECONDARY STATES TO TAKE AD25 MINISTRATIVE ACTION.—Nothing in this section shall be 


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1 construed to affect the authority of any State to enjoin 

2 conduct in violation of that State’s laws described in sec3 tion 2796(b)(1). 

4 ‘‘(j) STATE POWERS TO ENFORCE STATE LAWS.— 

5 ‘‘(1) IN GENERAL.—Subject to the provisions of 

6 subsection (b)(1)(G) (relating to injunctions) and 

7 paragraph (2), nothing in this section shall be con8 strued to affect the authority of any State to make 

9 use of any of its powers to enforce the laws of such 

10 State with respect to which a health insurance issuer 

11 is not exempt under subsection (b). 

12 ‘‘(2) COURTS OF COMPETENT JURISDICTION.— 

13 If a State seeks an injunction regarding the conduct 

14 described in paragraphs (1) and (2) of subsection 

15 (h), such injunction must be obtained from a Fed16 eral or State court of competent jurisdiction. 

17 ‘‘(k) STATES’ AUTHORITY TO SUE.—Nothing in this 

18 section shall affect the authority of any State to bring ac19 tion in any Federal or State court. 

20 ‘‘(l) GENERALLY APPLICABLE LAWS.—Nothing in 

21 this section shall be construed to affect the applicability 

22 of State laws generally applicable to persons or corpora23 tions. 

24 ‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO

25 HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 


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1 health insurance issuer is offering coverage in a primary 

2 State that does not accommodate residents of secondary 

3 States or does not provide a working mechanism for resi4 dents of a secondary State, and the issuer is offering cov5 erage under this part in such secondary State which has 

6 not adopted a qualified high risk pool as its acceptable 

7 alternative mechanism (as defined in section 2744(c)(2)), 

8 the issuer shall, with respect to any individual health in9 surance coverage offered in a secondary State under this 

10 part, comply with the guaranteed availability requirements 

11 for eligible individuals in section 2741. 

12 ‘‘SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR 

13 BEFORE ISSUER MAY SELL INTO SECONDARY 

14 STATES. 

15 ‘‘A health insurance issuer may not offer, sell, or 

16 issue individual health insurance coverage in a secondary 

17 State if the State insurance commissioner does not use 

18 a risk-based capital formula for the determination of cap19 ital and surplus requirements for all health insurance 

20 issuers. 

21 ‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE22 DURES. 

23 ‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur24 ance issuer may not offer, sell, or issue individual health 


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1 insurance coverage in a secondary State under the provi2 sions of this title unless— 

3 ‘‘(1) both the secondary State and the primary 

4 State have legislation or regulations in place estab5 lishing an independent review process for individuals 

6 who are covered by individual health insurance cov7 erage, or 

8 ‘‘(2) in any case in which the requirements of 

9 subparagraph (A) are not met with respect to the ei10 ther of such States, the issuer provides an inde11 pendent review mechanism substantially identical (as 

12 determined by the applicable State authority of such 

13 State) to that prescribed in the ‘Health Carrier Ex14 ternal Review Model Act’ of the National Association 

15 of Insurance Commissioners for all individuals who 

16 purchase insurance coverage under the terms of this 

17 part, except that, under such mechanism, the review 

18 is conducted by an independent medical reviewer, or 

19 a panel of such reviewers, with respect to whom the 

20 requirements of subsection (b) are met. 

21 ‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL

22 REVIEWERS.—In the case of any independent review 

23 mechanism referred to in subsection (a)(2)— 

24 ‘‘(1) IN GENERAL.—In referring a denial of a 

25 claim to an independent medical reviewer, or to any 


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1 panel of such reviewers, to conduct independent 

2 medical review, the issuer shall ensure that— 

3 ‘‘(A) each independent medical reviewer 

4 meets the qualifications described in paragraphs 

5 (2) and (3); 

6 ‘‘(B) with respect to each review, each re7 viewer meets the requirements of paragraph (4) 

8 and the reviewer, or at least 1 reviewer on the 

9 panel, meets the requirements described in 

10 paragraph (5); and 

11 ‘‘(C) compensation provided by the issuer 

12 to each reviewer is consistent with paragraph 

13 (6). 

14 ‘‘(2) LICENSURE AND EXPERTISE.—Each inde15 pendent medical reviewer shall be a physician 

16 (allopathic or osteopathic) or health care profes17 sional who— 

18 ‘‘(A) is appropriately credentialed or li19 censed in 1 or more States to deliver health 

20 care services; and 

21 ‘‘(B) typically treats the condition, makes 

22 the diagnosis, or provides the type of treatment 

23 under review. 

24 ‘‘(3) INDEPENDENCE.— 


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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), each independent medical reviewer 

3 in a case shall— 

4 ‘‘(i) not be a related party (as defined 

5 in paragraph (7)); 

6 ‘‘(ii) not have a material familial, fi7 nancial, or professional relationship with 

8 such a party; and 

9 ‘‘(iii) not otherwise have a conflict of 

10 interest with such a party (as determined 

11 under regulations). 

12 ‘‘(B) EXCEPTION.—Nothing in subpara13 graph (A) shall be construed to— 

14 ‘‘(i) prohibit an individual, solely on 

15 the basis of affiliation with the issuer, 

16 from serving as an independent medical re17 viewer if— 

18 ‘‘(I) a non-affiliated individual is 

19 not reasonably available; 

20 ‘‘(II) the affiliated individual is 

21 not involved in the provision of items 

22 or services in the case under review; 

23 ‘‘(III) the fact of such an affili24 ation is disclosed to the issuer and the 


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1 enrollee (or authorized representative) 

2 and neither party objects; and 

3 ‘‘(IV) the affiliated individual is 

4 not an employee of the issuer and 

5 does not provide services exclusively or 

6 primarily to or on behalf of the issuer; 

7 ‘‘(ii) prohibit an individual who has 

8 staff privileges at the institution where the 

9 treatment involved takes place from serv10 ing as an independent medical reviewer 

11 merely on the basis of such affiliation if 

12 the affiliation is disclosed to the issuer and 

13 the enrollee (or authorized representative), 

14 and neither party objects; or 

15 ‘‘(iii) prohibit receipt of compensation 

16 by an independent medical reviewer from 

17 an entity if the compensation is provided 

18 consistent with paragraph (6). 

19 ‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL

20 IN SAME FIELD.— 

21 ‘‘(A) IN GENERAL.—In a case involving 

22 treatment, or the provision of items or serv23 ices— 

24 ‘‘(i) by a physician, a reviewer shall be 

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1 pathic) of the same or similar specialty, as 

2 a physician who, acting within the appro3 priate scope of practice within the State in 

4 which the service is provided or rendered, 

5 typically treats the condition, makes the 

6 diagnosis, or provides the type of treat7 ment under review; or 

8 ‘‘(ii) by a non-physician health care 

9 professional, the reviewer, or at least 1 

10 member of the review panel, shall be a 

11 practicing non-physician health care pro12 fessional of the same or similar specialty 

13 as the non-physician health care profes14 sional who, acting within the appropriate 

15 scope of practice within the State in which 

16 the service is provided or rendered, typi17 cally treats the condition, makes the diag18 nosis, or provides the type of treatment 

19 under review. 

20 ‘‘(B) PRACTICING DEFINED.—For pur21 poses of this paragraph, the term ‘practicing’ 

22 means, with respect to an individual who is a 

23 physician or other health care professional, that 

24 the individual provides health care services to 


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1 individual patients on average at least 2 days 

2 per week. 

3 ‘‘(5) PEDIATRIC EXPERTISE.—In the case of an 

4 external review relating to a child, a reviewer shall 

5 have expertise under paragraph (2) in pediatrics. 

6 ‘‘(6) LIMITATIONS ON REVIEWER COMPENSA7 TION.—Compensation provided by the issuer to an 

8 independent medical reviewer in connection with a 

9 review under this section shall— 

10 ‘‘(A) not exceed a reasonable level; and 

11 ‘‘(B) not be contingent on the decision ren12 dered by the reviewer. 

13 ‘‘(7) RELATED PARTY DEFINED.—For purposes 

14 of this section, the term ‘related party’ means, with 

15 respect to a denial of a claim under a coverage relat16 ing to an enrollee, any of the following: 

17 ‘‘(A) The issuer involved, or any fiduciary, 

18 officer, director, or employee of the issuer. 

19 ‘‘(B) The enrollee (or authorized represent20 ative). 

21 ‘‘(C) The health care professional that pro22 vides the items or services involved in the de23 nial. 


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1 ‘‘(D) The institution at which the items or 

2 services (or treatment) involved in the denial 

3 are provided. 

4 ‘‘(E) The manufacturer of any drug or 

5 other item that is included in the items or serv6 ices involved in the denial. 

7 ‘‘(F) Any other party determined under 

8 any regulations to have a substantial interest in 

9 the denial involved. 

10 ‘‘(8) DEFINITIONS.—For purposes of this sub11 section: 

12 ‘‘(A) ENROLLEE.—The term ‘enrollee’ 

13 means, with respect to health insurance cov14 erage offered by a health insurance issuer, an 

15 individual enrolled with the issuer to receive 

16 such coverage. 

17 ‘‘(B) HEALTH CARE PROFESSIONAL.—The 

18 term ‘health care professional’ means an indi19 vidual who is licensed, accredited, or certified 

20 under State law to provide specified health care 

21 services and who is operating within the scope 

22 of such licensure, accreditation, or certification. 

23 ‘‘SEC. 2799. ENFORCEMENT. 

24 ‘‘(a) IN GENERAL.—Subject to subsection (b), with 

25 respect to specific individual health insurance coverage the 


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1 primary State for such coverage has sole jurisdiction to 

2 enforce the primary State’s covered laws in the primary 

3 State and any secondary State. 

4 ‘‘(b) SECONDARY STATE’S AUTHORITY.—Nothing in 

5 subsection (a) shall be construed to affect the authority 

6 of a secondary State to enforce its laws as set forth in 

7 the exception specified in section 2796(b)(1). 

8 ‘‘(c) COURT INTERPRETATION.—In reviewing action 

9 initiated by the applicable secondary State authority, the 

10 court of competent jurisdiction shall apply the covered 

11 laws of the primary State. 

12 ‘‘(d) NOTICE OF COMPLIANCE FAILURE.—In the case 

13 of individual health insurance coverage offered in a sec14 ondary State that fails to comply with the covered laws 

15 of the primary State, the applicable State authority of the 

16 secondary State may notify the applicable State authority 

17 of the primary State.’’. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 subsection (a) shall apply to individual health insurance 

20 coverage offered, issued, or sold after the date that is one 

21 year after the date of the enactment of this Act. 

22 (c) GAO ONGOING STUDY AND REPORTS.— 

23 (1) STUDY.—The Comptroller General of the 

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1 cerning the effect of the amendment made by sub2 section (a) on— 

3 (A) the number of uninsured and under-in4 sured; 

5 (B) the availability and cost of health in6 surance policies for individuals with pre-existing 

7 medical conditions; 

8 (C) the availability and cost of health in9 surance policies generally; 

10 (D) the elimination or reduction of dif11 ferent types of benefits under health insurance 

12 policies offered in different States; and 

13 (E) cases of fraud or abuse relating to 

14 health insurance coverage offered under such 

15 amendment and the resolution of such cases. 

16 (2) ANNUAL REPORTS.—The Comptroller Gen17 eral shall submit to Congress an annual report, after 

18 the end of each of the 5 years following the effective 

19 date of the amendment made by subsection (a), on 

20 the ongoing study conducted under paragraph (1). 

21 SEC. 304. SEVERABILITY. 

22 If any provision of this title or the application of such 

23 provision to any person or circumstance is held to be un24 constitutional, the remainder of this title and the applicaVerDate Mar 15 2010 23:44 Dec 22, 2011 Jkt 019200 PO 00000 Frm 00055 Fmt 6652 Sfmt 6201 E:\BILLS\H3682.IH H3682

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1 tion of the provisions of such to any other person or cir2 cumstance shall not be affected. 

3 TITLE IV—INCREASING TRANS4 PARENCY AND COMPETITION 

5 IN HEALTHCARE 

6 SEC. 401. ACCESS TO MEDICARE DATA TO IMPROVE TRANS7 PARENCY. 

8 Section 1874(e) of the Social Security Act (42 U.S.C. 

9 1395kk(e)), as added by section 10332 of Public Law 

10 111–148, is amended to read as follows: 

11 ‘‘(e) AVAILABILITY OF MEDICARE DATA.— 

12 ‘‘(1) IN GENERAL.—The Secretary shall make 

13 available to qualified entities (as defined in para14 graph (2)) data described in paragraph (3) for the 

15 purpose of analyzing cost and quality data and im16 proving transparency in the marketplace. 

17 ‘‘(2) QUALIFIED ENTITIES.—For purposes of 

18 this subsection, the term ‘qualified entity’ means ei19 ther of the following: 

20 ‘‘(A) DESIGNATED STATE ALL-PAYER

21 CLAIMS DATABASE.—A State all-payer claims 

22 database that— 

23 ‘‘(i) collects and combines claims in24 formation from public and private payers 


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1 and makes such data available to sub2 scribers; and 

3 ‘‘(ii) has been designated (in a man4 ner recognized by the Secretary) as meet5 ing requirements for receipt of data under 

6 this subsection. 

7 A State all-payer claims database that is in op8 eration as of December 1, 2011, and that is 

9 participating as of such date in a national fed10 eration of government, private, non-profit, and 

11 academic organizations focused on improving 

12 the development and deployment of State-based 

13 all payer claims databases shall be treated (for 

14 the period ending 1 year after the date of es15 tablishment of designation criteria under clause 

16 (ii) as meeting the requirement of such clause. 

17 ‘‘(B) OTHER QUALIFIED ENTITY.—A pub18 lic or private entity that— 

19 ‘‘(i) is qualified (as determined by the 

20 Secretary) to use claims data to evaluate 

21 the performance of providers of services 

22 and suppliers on measures of quality, effi23 ciency, effectiveness, and resource use; and 

24 ‘‘(ii) agrees to meet the other require25 ments described in paragraph (4) and 


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1 meets such other requirements as the Sec2 retary may specify, such as ensuring secu3 rity of data. 

4 ‘‘(3) DATA DESCRIBED.— 

5 ‘‘(A) IN GENERAL.—The data described in 

6 this paragraph are standardized extracts of 

7 claims data under parts A, B and D for items 

8 and services furnished under such parts for one 

9 or more geographic areas and time periods re10 quested by a qualified entity. The Secretary 

11 shall take such actions as the Secretary deems 

12 necessary to protect the identity of individuals 

13 entitled to or enrolled for benefits under such 

14 parts. 

15 ‘‘(B) STANDARDIZED EXTRACTS.—The 

16 standardized extracts described in this para17 graph shall be provided in a format that is 

18 agreed upon by an outside entity specified by 

19 the Secretary with experience gathering and 

20 analyzing claims data from payers and with a 

21 sufficient number of participants from State all22 payer claims databases. 

23 ‘‘(C) GEOGRAPHIC AREAS.—Geographic 

24 areas under subparagraph (A) may include in25 dividual States, groups of States, or nationwide, 


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1 if sufficient claims from other public and pri2 vate payers are produced for such areas. 

3 ‘‘(4) REQUIREMENTS.— 

4 ‘‘(A) SPECIFICATION OF USES AND METH5 ODOLOGIES.— 

6 ‘‘(i) IN GENERAL.—A qualified entity 

7 requesting data under this subsection 

8 shall— 

9 ‘‘(I) enter a data use agreement, 

10 developed by the Secretary specifically 

11 for the purposes of this subsection, 

12 governing applicable uses and disclo13 sures of data and that aligns all ac14 tivities of qualified entities under this 

15 subsection; 

16 ‘‘(II) submit to the Secretary a 

17 description of the type of activities for 

18 which such qualified entity will use 

19 such data, which may include popu20 lation health management, disease 

21 tracking, provider quality improve22 ment, and improving value in the 

23 health system; 

24 ‘‘(III) commit to use, if available, 

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1 ures to compare provider and supplier 

2 performance or, if not available, a 

3 transparent process as to the meas4 ures for such comparison; 

5 ‘‘(IV) include data made avail6 able under this subsection, with suffi7 cient claims data from other sources, 

8 in the evaluation and comparison of 

9 provider and supplier performance; 

10 and 

11 ‘‘(V) make reports available to 

12 health care consumers consistent with 

13 paragraph (5)(E). 

14 ‘‘(ii) AVAILABILITY OF DATA.—A 

15 qualified entity requesting data under this 

16 subsection may make such data available 

17 to providers of services and suppliers, in18 cluding in the format of a report for such 

19 a provider or supplier developed from a 

20 search of a State all-payer claims database. 

21 The entity may charge such providers and 

22 suppliers a reasonable fee for making such 

23 data available. 

24 ‘‘(B) FEE.—Data described in paragraph 

25 (3) shall be made available to a qualified entity 


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1 under this subsection at a fee equal to the cost 

2 of making such data available. Such fee shall be 

3 pro-rated across the entire agreement period be4 tween the qualified entity and the Secretary . 

5 Any fee collected pursuant to this subparagraph 

6 shall be deposited into the Federal Supple7 mentary Medical Insurance Trust Fund under 

8 section 1841. 

9 ‘‘(C) LIMITATION OF USES.—Data released 

10 to a qualified entity under this subsection shall 

11 not be subject to discovery or admission as evi12 dence in judicial or administrative proceedings 

13 without consent of the applicable provider of 

14 services or supplier. 

15 ‘‘(5) STUDY AND REPORT BY THE INSTITUTE

16 OF MEDICINE.— 

17 ‘‘(A) IN GENERAL.—The Secretary may 

18 enter into an agreement with the Institute of 

19 Medicine of the National Academies to conduct 

20 a study as to which service data under parts A 

21 and B would be most valuable and actionable 

22 for consumers in assessing the performance of 

23 providers of services and suppliers. 

24 ‘‘(B) REPORT.—An agreement entered into 

25 under subparagraph (A) shall provide for the 


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1 Institute of Medicine to submit to the Secretary 

2 and to Congress a report containing the results 

3 of the study and recommendations for providing 

4 such information to consumers within one year 

5 after the date of the enactment of this para6 graph. 

7 ‘‘(C) ROLE OF QUALIFIED ENTITIES IN

8 DEVELOPING REPORTS FOR CONSUMERS.—Be9 fore making such recommendations, qualified 

10 entities shall have an opportunity to provide 

11 input to the Institute of Medicine as to the type 

12 of information that should be conveyed to con13 sumers. 

14 ‘‘(D) DEVELOPMENT AND IMPLEMENTA15 TION OF REPORTS FOR CONSUMERS.—Based on 

16 the report under subparagraph (B) and input 

17 from qualified entities, the Secretary shall de18 velop requirements for reports made available 

19 to consumers under this subsection with the 

20 goal of increasing health care transparency. 

21 ‘‘(E) REPORTS TO CONSUMERS.—Reports 

22 consistent with such requirements shall be 

23 made available to consumers within one year of 

24 the completion of such report.’’. 


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1 TITLE V—EXPANDING THE EF2 FECTIVENESS OF HEALTH 

3 SAVINGS ACCOUNTS 

4 SEC. 501. AMENDMENT OF 1986 CODE. 

5 Except as otherwise expressly provided, whenever in 

6 this title an amendment or repeal is expressed in terms 

7 of an amendment to, or repeal of, a section or other provi8 sion, the reference shall be considered to be made to a 

9 section or other provision of the Internal Revenue Code 

10 of 1986. 

11 Subtitle A—Provisions Relating to 

12 Tax-Preferred Health Accounts 

13 SEC. 511. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CON14 TRIBUTIONS TO THE SAME HSA ACCOUNT. 

15 (a) IN GENERAL.—Paragraph (3) of section 223(b) 

16 is amended by adding at the end the following new sub17 paragraph: 

18 ‘‘(C) SPECIAL RULE WHERE BOTH

19 SPOUSES ARE ELIGIBLE INDIVIDUALS WITH 1

20 ACCOUNT.—If— 

21 ‘‘(i) an individual and the individual’s 

22 spouse have both attained age 55 before 

23 the close of the taxable year, and 


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1 ‘‘(ii) the spouse is not an account ben2 eficiary of a health savings account as of 

3 the close of such year, 

4 the additional contribution amount shall be 200 

5 percent of the amount otherwise determined 

6 under subparagraph (B).’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to taxable years beginning after 

9 the date of the enactment of this Act. 

10 SEC. 512. PROVISIONS RELATING TO MEDICARE. 

11 (a) INDIVIDUALS OVER AGE 65 ONLY ENROLLED IN

12 MEDICARE PART A.—Paragraph (7) of section 223(b) is 

13 amended by adding at the end the following: ‘‘This para14 graph shall not apply to any individual during any period 

15 for which the individual’s only entitlement to such benefits 

16 is an entitlement to hospital insurance benefits under part 

17 A of title XVIII of such Act pursuant to an enrollment 

18 for such hospital insurance benefits under section 

19 226(a)(1) of such Act.’’. 

20 (b) MEDICARE BENEFICIARIES PARTICIPATING IN

21 MEDICARE ADVANTAGE MSA MAY CONTRIBUTE THEIR

22 OWN MONEY TO THEIR MSA.—Subsection (b) of section 

23 138 is amended by striking paragraph (2) and by redesig24 nating paragraphs (3) and (4) as paragraphs (2) and (3), 

25 respectively. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

4 SEC. 513. INDIVIDUALS ELIGIBLE FOR VETERANS BENE5 FITS FOR A SERVICE-CONNECTED DIS6 ABILITY. 

7 (a) IN GENERAL.—Paragraph (1) of section 223(c) 

8 is amended by adding at the end the following new sub9 paragraph: 

10 ‘‘(C) SPECIAL RULE FOR INDIVIDUALS ELI11 GIBLE FOR CERTAIN VETERANS BENEFITS.— 

12 For purposes of subparagraph (A)(ii), an indi13 vidual shall not be treated as covered under a 

14 health plan described in such subparagraph 

15 merely because the individual receives periodic 

16 hospital care or medical services for a service17 connected disability under any law administered 

18 by the Secretary of Veterans Affairs but only if 

19 the individual is not eligible to receive such care 

20 or services for any condition other than a serv21 ice-connected disability.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to taxable years beginning after 

24 the date of the enactment of this Act. 


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1 SEC. 514. INDIVIDUALS ELIGIBLE FOR INDIAN HEALTH 

2 SERVICE ASSISTANCE. 

3 (a) IN GENERAL.—Paragraph (1) of section 223(c), 

4 as amended by section 612, is amended by adding at the 

5 end the following new subparagraph: 

6 ‘‘(D) SPECIAL RULE FOR INDIVIDUALS EL7 IGIBLE FOR ASSISTANCE UNDER INDIAN

8 HEALTH SERVICE PROGRAMS.—For purposes of 

9 subparagraph (A)(ii), an individual shall not be 

10 treated as covered under a health plan de11 scribed in such subparagraph merely because 

12 the individual receives hospital care or medical 

13 services under a medical care program of the 

14 Indian Health Service or of a tribal organiza15 tion.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 this section shall apply to taxable years beginning after 

18 the date of the enactment of this Act. 

19 SEC. 515. INDIVIDUALS ELIGIBLE FOR TRICARE COVERAGE. 

20 (a) IN GENERAL.—Paragraph (1) of section 223(c), 

21 as amended by sections 613 and 614, is amended by add22 ing at the end the following new subparagraph: 

23 ‘‘(E) SPECIAL RULE FOR INDIVIDUALS EL24 IGIBLE FOR ASSISTANCE UNDER TRICARE.—For 

25 purposes of subparagraph (A)(ii), an individual 

26 shall not be treated as covered under a health 


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1 plan described in such subparagraph merely be2 cause the individual is eligible to receive hos3 pital care, medical services, or prescription 

4 drugs under TRICARE Extra or TRICARE 

5 Standard and such individual is not enrolled in 

6 TRICARE Prime.’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to taxable years beginning after 

9 the date of the enactment of this Act. 

10 SEC. 516. HEALTH FSA CARRYFORWARDS. 

11 (a) IN GENERAL.—Section 125 is amended by redes12 ignating subsections (i) and (j) as subsections (j) and (k), 

13 respectively, and by inserting after subsection (h) the fol14 lowing new subsection: 

15 ‘‘(i) SPECIAL RULES APPLICABLE TO HEALTH

16 FLEXIBLE SPENDING ARRANGEMENTS.— 

17 ‘‘(1) IN GENERAL.—For purposes of this title, 

18 a plan or other arrangement shall not fail to be 

19 treated as a health flexible spending or similar ar20 rangement solely because under the plan or arrange21 ment a participant is permitted access to any unused 

22 balance in the participant’s accounts under such 

23 plan or arrangement in the manner provided under 

24 paragraph (2). 


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1 ‘‘(2) CARRYFORWARD OF UNUSED BENEFITS IN

2 HEALTH ARRANGEMENTS.— 

3 ‘‘(A) IN GENERAL.—A plan or arrange4 ment may permit a participant in a health flexi5 ble spending arrangement to elect to carry for6 ward any aggregate unused balances in the par7 ticipant’s accounts under such arrangement as 

8 of the close of any year to the succeeding year. 

9 Such carryforward shall be treated as having 

10 occurred within 30 days of the close of the year. 

11 ‘‘(B) DOLLAR LIMIT ON

12 CARRYFORWARDS.— 

13 ‘‘(i) IN GENERAL.—The amount which 

14 a participant may elect to carry forward 

15 under subparagraph (A) from any year 

16 shall not exceed $500. For purposes of this 

17 paragraph, all plans and arrangements 

18 maintained by an employer or any related 

19 person shall be treated as 1 plan. 

20 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.— 

21 In the case of any taxable year beginning 

22 in a calendar year after 2011, the $500 

23 amount under clause (i) shall be increased 

24 by an amount equal to— 

25 ‘‘(I) $500, multiplied by 


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1 ‘‘(II) the cost-of-living adjust2 ment determined under section 1(f)(3) 

3 for such calendar year, determined by 

4 substituting ‘2010’ for ‘1992’ in sub5 paragraph (B) thereof. 

6 If any dollar amount as increased under 

7 this clause is not a multiple of $100, such 

8 amount shall be rounded to the next lowest 

9 multiple of $100. 

10 ‘‘(C) EXCLUSION FROM GROSS INCOME.— 

11 No amount shall be required to be included in 

12 gross income under this chapter by reason of 

13 any carryforward under this paragraph. 

14 ‘‘(D) COORDINATION WITH LIMITS.—The 

15 maximum amount which may be contributed to 

16 a health flexible spending arrangement for any 

17 year to which an unused amount is carried 

18 under this paragraph shall be reduced by such 

19 amount. 

20 ‘‘(3) TERMS RELATING TO FLEXIBLE SPENDING

21 ARRANGEMENTS.— 

22 ‘‘(A) FLEXIBLE SPENDING ARRANGE23 MENTS.—For purposes of this subsection, a 

24 flexible spending arrangement is a benefit pro25 gram which provides employees with coverage 


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1 under which specified incurred expenses may be 

2 reimbursed (subject to reimbursement maxi3 mums and other reasonable conditions). 

4 ‘‘(B) HEALTH ARRANGEMENTS.—The term 

5 ‘health flexible spending arrangement’ means 

6 any flexible spending arrangement (or portion 

7 thereof) which provides payments for expenses 

8 incurred for medical care (as defined in section 

9 213(d)).’’. 

10 (b) CONFORMING AMENDMENTS.— 

11 (1) The heading for section 125 of the Internal 

12 Revenue Code of 1986 is amended by inserting 

13 ‘‘AND HEALTH FLEXIBLE SPENDING ARRANGE14 MENTS’’ after ‘‘PLANS’’. 

15 (2) The item relating to section 125 in the table 

16 of sections for part III of subchapter B of chapter 

17 1 of such Code is amended by inserting ‘‘and health 

18 flexible spending arrangements’’ after ‘‘plans’’. 

19 (c) EFFECTIVE DATE.—The amendments made by 

20 this section shall take effect on the date of the enactment 

21 of this Act. 

22 SEC. 517. FSA AND HRA INTERACTION WITH HSAS. 

23 (a) ELIGIBLE INDIVIDUALS INCLUDE FSA AND HRA 

24 PARTICIPANTS.—Subparagraph (B) of section 223(c)(1) 

25 is amended— 


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1 (1) by striking ‘‘and’’ at the end of clause (ii), 

2 (2) by striking the period at the end of clause 

3 (iii) and inserting ‘‘, and’’, and 

4 (3) by inserting after clause (iii) the following 

5 new clause: 

6 ‘‘(iv) coverage under a health flexible 

7 spending arrangement or a health reim8 bursement arrangement in the plan year a 

9 qualified HSA distribution as described in 

10 section 106(e) is made on behalf of the in11 dividual if after the qualified HSA dis12 tribution is made and for the remaining 

13 duration of the plan year, the coverage 

14 provided under the health flexible spending 

15 arrangement or health reimbursement ar16 rangement is converted to— 

17 ‘‘(I) coverage that does not pay 

18 or reimburse any medical expense in19 curred before the minimum annual de20 ductible under paragraph (2)(A)(i) 

21 (prorated for the period occurring 

22 after the qualified HSA distribution is 

23 made) is satisfied, 

24 ‘‘(II) coverage that, after the 

25 qualified HSA distribution is made, 


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1 does not pay or reimburse any med2 ical expense incurred after the quali3 fied HSA distribution is made other 

4 than preventive care as defined in 

5 paragraph (2)(C), 

6 ‘‘(III) coverage that, after the 

7 qualified HSA distribution is made, 

8 pays or reimburses benefits for cov9 erage described in clause (ii) (but not 

10 through insurance or for long-term 

11 care services), 

12 ‘‘(IV) coverage that, after the 

13 qualified HSA distribution is made, 

14 pays or reimburses benefits for per15 mitted insurance or coverage de16 scribed in clause (ii) (but not for long17 term care services), 

18 ‘‘(V) coverage that, after the 

19 qualified HSA distribution is made, 

20 pays or reimburses only those medical 

21 expenses incurred after an individual’s 

22 retirement (and no expenses incurred 

23 before retirement), or 

24 ‘‘(VI) coverage that, after the 

25 qualified HSA distribution is made, is 


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1 suspended, pursuant to an election 

2 made on or before the date the indi3 vidual elects a qualified HSA distribu4 tion or, if later, on the date of the in5 dividual enrolls in a high deductible 

6 health plan, that does not pay or re7 imburse, at any time, any medical ex8 pense incurred during the suspension 

9 period except as defined in the pre10 ceding subclauses of this clause.’’. 

11 (b) QUALIFIED HSA DISTRIBUTION SHALL NOT AF12 FECT FLEXIBLE SPENDING ARRANGEMENT.—Paragraph 

13 (1) of section 106(e) is amended to read as follows: 

14 ‘‘(1) IN GENERAL.—A plan shall not fail to be 

15 treated as a health flexible spending arrangement 

16 under this section, section 105, or section 125, or as 

17 a health reimbursement arrangement under this sec18 tion or section 105, merely because such plan pro19 vides for a qualified HSA distribution.’’. 

20 (c) FSA BALANCES AT YEAR END SHALL NOT FOR21 FEIT.—Paragraph (2) of section 125(d) is amended by 

22 adding at the end the following new subparagraph: 

23 ‘‘(E) EXCEPTION FOR QUALIFIED HSA DIS24 TRIBUTIONS.—Subparagraph (A) shall not 

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1 maining in a health flexible spending account at 

2 the end of a plan year that an individual elects 

3 to contribute to a health savings account pursu4 ant to a qualified HSA distribution (as defined 

5 in section 106(e)(2)).’’. 

6 (d) SIMPLIFICATION OF LIMITATIONS ON FSA AND

7 HRA ROLLOVERS.—Paragraph (2) of section 106(e) is 

8 amended to read as follows: 

9 ‘‘(2) QUALIFIED HSA DISTRIBUTION.— 

10 ‘‘(A) IN GENERAL.—The term ‘qualified 

11 HSA distribution’ means a distribution from a 

12 health flexible spending arrangement or health 

13 reimbursement arrangement to the extent that 

14 such distribution does not exceed the lesser 

15 of— 

16 ‘‘(i) the balance in such arrangement 

17 as of the date of such distribution, or 

18 ‘‘(ii) the amount determined under 

19 subparagraph (B). 

20 Such term shall not include more than 1 dis21 tribution with respect to any arrangement. 

22 ‘‘(B) DOLLAR LIMITATIONS.— 

23 ‘‘(i) DISTRIBUTIONS FROM A HEALTH

24 FLEXIBLE SPENDING ARRANGEMENT.—A 

25 qualified HSA distribution from a health 


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1 flexible spending arrangement shall not ex2 ceed the applicable amount. 

3 ‘‘(ii) DISTRIBUTIONS FROM A HEALTH

4 REIMBURSEMENT ARRANGEMENT.—A 

5 qualified HSA distribution from a health 

6 reimbursement arrangement shall not ex7 ceed— 

8 ‘‘(I) the applicable amount di9 vided by 12, multiplied by 

10 ‘‘(II) the number of months dur11 ing which the individual is a partici12 pant in the health reimbursement ar13 rangement. 

14 ‘‘(iii) APPLICABLE AMOUNT.—For 

15 purposes of this subparagraph, the applica16 ble amount is— 

17 ‘‘(I) $2,250 in the case of an eli18 gible individual who has self-only cov19 erage under a high deductible health 

20 plan at the time of such distribution, 

21 and 

22 ‘‘(II) $4,500 in the case of an eli23 gible individual who has family cov24 erage under a high deductible health 


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1 plan at the time of such distribu2 tion.’’. 

3 (e) ELIMINATION OF ADDITIONAL TAX FOR FAILURE

4 TO MAINTAIN HIGH DEDUCTIBLE HEALTH PLAN COV5 ERAGE.—Subsection (e) of section 106 is amended— 

6 (1) by striking paragraph (3) and redesignating 

7 paragraphs (4) and (5) as paragraphs (3) and (4), 

8 respectively, and 

9 (2) by striking subparagraph (A) of paragraph 

10 (3), as so redesignated, and redesignating subpara11 graphs (B) and (C) of such paragraph as subpara12 graphs (A) and (B) thereof, respectively. 

13 (f) LIMITED PURPOSE FSAS AND HRAS.—Sub14 section (e) of section 106, as amended by this section, is 

15 amended by adding at the end the following new para16 graph: 

17 ‘‘(5) LIMITED PURPOSE FSAS AND HRAS.—A 

18 plan shall not fail to be a health flexible spending 

19 arrangement or health reimbursement arrangement 

20 under this section or section 105 merely because the 

21 plan converts coverage for individuals who enroll in 

22 a high deductible health plan described in section 

23 223(c)(2) to coverage described in section 

24 223(c)(1)(B)(iv). Coverage for such individuals may 

25 be converted as of the date of enrollment in the high 


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1 deductible health plan, without regard to the period 

2 of coverage under the health flexible spending ar3 rangement or health reimbursement arrangement, 

4 and without requiring any change in coverage to in5 dividuals who do not enroll in a high deductible 

6 health plan.’’. 

7 (g) DISTRIBUTION AMOUNTS ADJUSTED FOR COST8 OF-LIVING.—Subsection (e) of section 106, as amended 

9 by this section, is amended by adding at the end the fol10 lowing new paragraph: 

11 ‘‘(6) COST-OF-LIVING ADJUSTMENT.— 

12 ‘‘(A) IN GENERAL.—In the case of any 

13 taxable year beginning after December 31, 

14 2011, each of the dollar amounts in paragraph 

15 (2)(B)(iii) shall be increased by an amount 

16 equal to such dollar amount, multiplied by the 

17 cost-of-living adjustment determined under sec18 tion 1(f)(3) for the calendar year in which such 

19 taxable year begins by substituting ‘calendar 

20 year 2010’ for ‘calendar year 1992’ in subpara21 graph (B) thereof. 

22 ‘‘(B) ROUNDING.—If any increase under 

23 paragraph (1) is not a multiple of $50, such in24 crease shall be rounded to the nearest multiple 

25 of $50.’’. 


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1 (h) DISCLAIMER OF DISQUALIFYING COVERAGE.— 

2 Subparagraph (B) of section 223(c)(1), as amended by 

3 this section, is amended— 

4 (1) by striking ‘‘and’’ at the end of clause (iii), 

5 (2) by striking the period at the end of clause 

6 (iv) and inserting ‘‘, and’’, and 

7 (3) by inserting after clause (iv) the following 

8 new clause: 

9 ‘‘(v) any coverage (including prospec10 tive coverage) under a health plan that is 

11 not a high deductible health plan which is 

12 disclaimed in writing, at the time of the 

13 creation or organization of the health sav14 ings account, including by execution of a 

15 trust described in subsection (d)(1) 

16 through a governing instrument that in17 cludes such a disclaimer, or by acceptance 

18 of an amendment to such a trust that in19 cludes such a disclaimer.’’. 

20 (i) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to taxable years beginning after 

22 the date of the enactment of this Act. 


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1 SEC. 518. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIP2 TION AND OVER-THE-COUNTER MEDICINES 

3 AND DRUGS. 

4 (a) REFERENCE TO REPEAL OF DISTRIBUTIONS FOR

5 MEDICINE QUALIFIED ONLY IF FOR PRESCRIBED DRUG

6 OR INSULIN.—Section 101 of this Act provides for the re7 peal of section 9003 of the Patient Protection and Afford8 able Care Act (Public Law 111–148) and the amendments 

9 made by such section. The Internal Revenue Code of 1986 

10 shall be applied as if such section 9003 and amendments 

11 had never been enacted. 

12 (b) ALLOWANCE OF DISTRIBUTIONS FOR ALL MEDI13 CINES AND DRUGS.— 

14 (1) HSAS.—Subparagraph (A) of section 

15 223(d)(2) is amended by adding at the end the fol16 lowing: ‘‘Such term shall include an amount paid for 

17 any prescription or over-the-counter medicine or 

18 drug.’’. 

19 (2) ARCHER MSAS.—Subparagraph (A) of sec20 tion 220(d)(2) is amended by adding at the end the 

21 following: ‘‘Such term shall include an amount paid 

22 for any prescription or over-the-counter medicine or 

23 drug.’’. 

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1 MENTS.—Section 106 is amended by adding at the 

2 end the following new subsection: 

3 ‘‘(f) REIMBURSEMENTS FOR ALL MEDICINES AND

4 DRUGS.—For purposes of this section and section 105, 

5 reimbursement for expenses incurred for any prescription 

6 or over-the-counter medicine or drug shall be treated as 

7 a reimbursement for medical expenses.’’. 

8 (4) EFFECTIVE DATES.— 

9 (A) DISTRIBUTIONS FROM SAVINGS AC10 COUNTS.—The amendments made by para11 graphs (1) and (2) shall apply to amounts paid 

12 with respect to taxable years beginning after 

13 December 31, 2009. 

14 (B) REIMBURSEMENTS.—The amendment 

15 made by paragraph (3) shall apply to expenses 

16 incurred with respect to taxable years beginning 

17 after December 31, 2009. 

18 SEC. 519. PURCHASE OF HEALTH INSURANCE FROM HSA 

19 ACCOUNT. 

20 (a) IN GENERAL.—Paragraph (2) of section 223(d) 

21 is amended to read as follows: 

22 ‘‘(2) QUALIFIED MEDICAL EXPENSES.— 

23 ‘‘(A) IN GENERAL.—The term ‘qualified 

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1 ficiary for medical care (as defined in section 

2 213(d)) for any individual covered by a high de3 ductible health plan of the account beneficiary, 

4 but only to the extent such amounts are not 

5 compensated for by insurance or otherwise. 

6 ‘‘(B) HEALTH INSURANCE MAY NOT BE

7 PURCHASED FROM ACCOUNT.—Except as pro8 vided in subparagraph (C), subparagraph (A) 

9 shall not apply to any payment for insurance. 

10 ‘‘(C) EXCEPTIONS.—Subparagraph (B) 

11 shall not apply to any expense for coverage 

12 under— 

13 ‘‘(i) a health plan during any period 

14 of continuation coverage required under 

15 any Federal law, 

16 ‘‘(ii) a qualified long-term care insur17 ance contract (as defined in section 

18 7702B(b)), 

19 ‘‘(iii) a health plan during any period 

20 in which the individual is receiving unem21 ployment compensation under any Federal 

22 or State law, 

23 ‘‘(iv) a high deductible health plan, or 

24 ‘‘(v) any health insurance under title 

25 XVIII of the Social Security Act, other 


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1 than a Medicare supplemental policy (as 

2 defined in section 1882 of such Act).’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply with respect to insurance pur5 chased after the date of the enactment of this Act in tax6 able years beginning after such date. 

7 SEC. 520. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 

8 INCURRED BEFORE ESTABLISHMENT OF AC9 COUNT. 

10 (a) IN GENERAL.—Paragraph (2) of section 223(d), 

11 as amended by section 619, is amended by adding at the 

12 end the following new subparagraph: 

13 ‘‘(D) CERTAIN MEDICAL EXPENSES IN14 CURRED BEFORE ESTABLISHMENT OF ACCOUNT

15 TREATED AS QUALIFIED.—An expense shall not 

16 fail to be treated as a qualified medical expense 

17 solely because such expense was incurred before 

18 the establishment of the health savings account 

19 if such expense was incurred— 

20 ‘‘(i) during either— 

21 ‘‘(I) the taxable year in which the 

22 health savings account was estab23 lished, or 

24 ‘‘(II) the preceding taxable year 

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1 count established after the taxable 

2 year in which such expense was in3 curred but before the time prescribed 

4 by law for filing the return for such 

5 taxable year (not including extensions 

6 thereof), and 

7 ‘‘(ii) for medical care of an individual 

8 during a period that such individual was 

9 covered by a high deductible health plan 

10 and met the requirements of subsection 

11 (c)(1)(A)(ii) (after application of sub12 section (c)(1)(B)).’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 this section shall apply to taxable years beginning after 

15 the date of the enactment of this Act. 

16 SEC. 521. PREVENTIVE CARE PRESCRIPTION DRUG CLARI17 FICATION. 

18 (a) CLARIFY USE OF DRUGS IN PREVENTIVE

19 CARE.—Subparagraph (C) of section 223(c)(2) is amend20 ed by adding at the end the following: ‘‘Preventive care 

21 shall include prescription and over-the-counter drugs and 

22 medicines which have the primary purpose of preventing 

23 the onset of, further deterioration from, or complications 

24 associated with chronic conditions, illnesses, or diseases.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2003. 

4 SEC. 522. EQUIVALENT BANKRUPTCY PROTECTIONS FOR 

5 HEALTH SAVINGS ACCOUNTS AS RETIRE6 MENT FUNDS. 

7 (a) IN GENERAL.—Section 522 of title 11, United 

8 States Code, is amended by adding at the end the fol9 lowing new subsection: 

10 ‘‘(r) TREATMENT OF HEALTH SAVINGS AC11 COUNTS.—For purposes of this section, any health savings 

12 account (as described in section 223 of the Internal Rev13 enue Code of 1986) shall be treated in the same manner 

14 as an individual retirement account described in section 

15 408 of such Code.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 this section shall apply to cases commencing under title 

18 11, United States Code, after the date of the enactment 

19 of this Act. 

20 SEC. 523. ADMINISTRATIVE ERROR CORRECTION BEFORE 

21 DUE DATE OF RETURN. 

22 (a) IN GENERAL.—Paragraph (4) of section 223(f) 

23 is amended by adding at the end the following new sub24 paragraph: 


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1 ‘‘(D) EXCEPTION FOR ADMINISTRATIVE

2 ERRORS CORRECTED BEFORE DUE DATE OF RE3 TURN.—Subparagraph (A) shall not apply if 

4 any payment or distribution is made to correct 

5 an administrative, clerical or payroll contribu6 tion error and if— 

7 ‘‘(i) such distribution is received by 

8 the individual on or before the last day 

9 prescribed by law (including extensions of 

10 time) for filing such individual’s return for 

11 such taxable year, and 

12 ‘‘(ii) such distribution is accompanied 

13 by the amount of net income attributable 

14 to such contribution. 

15 Any net income described in clause (ii) shall be 

16 included in the gross income of the individual 

17 for the taxable year in which it is received.’’. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 this section shall take effect on the date of the enactment 

20 of this Act. 

21 SEC. 524. REAUTHORIZATION OF MEDICAID HEALTH OP22 PORTUNITY ACCOUNTS. 

23 (a) IN GENERAL.—Section 1938 of the Social Secu24 rity Act (42 U.S.C. 1396u–8) is amended— 

25 (1) in subsection (a)— 


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1 (A) by striking paragraph (2) and insert2 ing the following: 

3 ‘‘(2) INITIAL DEMONSTRATION.—The dem4 onstration program under this section shall begin 90 

5 days after the date of the enactment of this para6 graph. The Secretary shall approve States to con7 duct demonstration programs under this section for 

8 a 5-year period, with each State demonstration pro9 gram covering 1 or more geographic areas specified 

10 by the State. With respect to a State, after the ini11 tial 5-year period of any demonstration program 

12 conducted under this section by the State, unless the 

13 Secretary finds, taking into account cost-effective14 ness and quality of care, that the State demonstra15 tion program has been unsuccessful, the demonstra16 tion program may be extended or made permanent 

17 in the State.’’; and 

18 (B) in paragraph (3), in the matter pre19 ceding subparagraph (A)— 

20 (i) by striking ‘‘not’’; and 

21 (ii) by striking ‘‘unless’’ and inserting 

22 ‘‘if’’; 

23 (2) in subsection (b)— 

24 (A) in paragraph (3), by inserting ‘‘clause 

25 (i) through (vii), (viii) (without regard to the 


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1 amendment made by section 2004(c)(2) of Pub2 lic Law 111–148), (x), or (xi) of’’ after ‘‘de3 scribed in’’; and 

4 (B) by striking paragraphs (4), (5), and 

5 (6); 

6 (3) in subsection (c)— 

7 (A) by striking paragraphs (3) and (4); 

8 (B) by redesignating paragraphs (5) 

9 through (8) as paragraphs (3) through (6), re10 spectively; and 

11 (C) in paragraph (4) (as redesignated by 

12 subparagraph (B)), by striking ‘‘Subject to sub13 paragraphs (D) and (E)’’ and inserting ‘‘Sub14 ject to subparagraph (D)’’; and 

15 (4) in subsection (d)— 

16 (A) in paragraph (2), by striking subpara17 graph (E); and 

18 (B) in paragraph (3)— 

19 (i) in subparagraph (A)(ii), by strik20 ing ‘‘Subject to subparagraph (B)(ii), in’’ 

21 and inserting ‘‘In’’; and 

22 (ii) by striking subparagraph (B) and 

23 inserting the following: 

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1 GIBLE FOR PUBLIC BENEFIT.—Notwithstanding 

2 any other provision of law, if an account holder 

3 of a health opportunity account becomes ineli4 gible for benefits under this title because of an 

5 increase in income or assets— 

6 ‘‘(i) no additional contribution shall be 

7 made into the account under paragraph 

8 (2)(A)(i); and 

9 ‘‘(ii) the account shall remain avail10 able to the account holder for 3 years after 

11 the date on which the individual becomes 

12 ineligible for such benefits for withdrawals 

13 under the same terms and conditions as if 

14 the account holder remained eligible for 

15 such benefits, and such withdrawals shall 

16 be treated as medical assistance in accord17 ance with subsection (c)(4).’’. 

18 (b) CONFORMING AMENDMENT.—Section 613 of 

19 Public Law 111–3 is repealed. 


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1 Subtitle B—Other Provisions 

2 SEC. 531. CERTAIN EXERCISE EQUIPMENT AND PHYSICAL 

3 FITNESS PROGRAMS TREATED AS MEDICAL 

4 CARE. 

5 (a) IN GENERAL.—Subsection (d) of section 213 is 

6 amended by adding at the end the following new para7 graph: 

8 ‘‘(12) EXERCISE EQUIPMENT AND PHYSICAL

9 FITNESS PROGRAMS.— 

10 ‘‘(A) IN GENERAL.—The term ‘medical 

11 care’ shall include amounts paid— 

12 ‘‘(i) to purchase or use equipment 

13 used in a program (including a self-di14 rected program) of physical exercise, 

15 ‘‘(ii) to participate, or receive instruc16 tion, in a program of physical exercise, and 

17 ‘‘(iii) for membership dues in a fitness 

18 club the primary purpose of which is to 

19 provide access to equipment and facilities 

20 for physical exercise. 

21 ‘‘(B) LIMITATION.—Amounts treated as 

22 medical care under subparagraph (A) shall not 

23 exceed $1,000 with respect to any individual for 

24 any taxable year.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

4 SEC. 532. CERTAIN NUTRITIONAL AND DIETARY SUPPLE5 MENTS TO BE TREATED AS MEDICAL CARE. 

6 (a) IN GENERAL.—Subsection (d) of section 213, as 

7 amended by section 631, is amended by adding at the end 

8 the following new paragraph: 

9 ‘‘(13) NUTRITIONAL AND DIETARY SUPPLE10 MENTS.— 

11 ‘‘(A) IN GENERAL.—The term ‘medical 

12 care’ shall include amounts paid to purchase 

13 herbs, vitamins, minerals, homeopathic rem14 edies, meal replacement products, and other di15 etary and nutritional supplements. 

16 ‘‘(B) LIMITATION.—Amounts treated as 

17 medical care under subparagraph (A) shall not 

18 exceed $1,000 with respect to any individual for 

19 any taxable year. 

20 ‘‘(C) MEAL REPLACEMENT PRODUCT.— 

21 For purposes of this paragraph, the term ‘meal 

22 replacement product’ means any product that— 

23 ‘‘(i) is permitted to bear labeling mak24 ing a claim described in section 403(r)(3) 


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1 of the Federal Food, Drug, and Cosmetic 

2 Act, and 

3 ‘‘(ii) is permitted to claim under such 

4 section that such product is low in fat and 

5 is a good source of protein, fiber, and mul6 tiple essential vitamins and minerals.’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to taxable years beginning after 

9 the date of the enactment of this Act. 

10 SEC. 533. CERTAIN PROVIDER FEES TO BE TREATED AS 

11 MEDICAL CARE. 

12 (a) IN GENERAL.—Subsection (d) of section 213, as 

13 amended by sections 631 and 632, is amended by adding 

14 at the end the following new paragraph: 

15 ‘‘(14) PERIODIC PROVIDER FEES.—The term 

16 ‘medical care’ shall include periodic fees paid to a 

17 primary physician, physician assistant, or nurse 

18 practitioner for the right to receive medical services 

19 on an as-needed basis.’’. 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 this section shall apply to taxable years beginning after 

22 the date of the enactment of this Act. 


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1 TITLE VI—COVERING PEOPLE 

2 WITH PRE-EXISTING CONDI3 TIONS, REMOVING ANNUAL 

4 AND LIFETIME COVERAGE 

5 CAPS, AND EXPANDING AC6 CESS TO CARE 

7 Subtitle A—Making Health Care 

8 Coverage Affordable for Every 

9 American 

10 CHAPTER 1—ENSURING COVERAGE FOR 

11 INDIVIDUALS WITH PREEXISTING 

12 CONDITIONS AND MULTIPLE HEALTH 

13 CARE NEEDS 

14 SEC. 601. ESTABLISH UNIVERSAL ACCESS PROGRAMS TO 

15 IMPROVE HIGH RISK POOLS AND REINSUR16 ANCE MARKETS. 

17 (a) STATE REQUIREMENT.— 

18 (1) IN GENERAL.—Not later than January 1, 

19 2012, each State shall— 

20 (A) subject to paragraph (3), operate— 

21 (i) a qualified State reinsurance pro22 gram described in subsection (b); or 

23 (ii) qualifying State high risk pool de24 scribed in subsection (c)(1); and 


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1 (B) subject to paragraph (3), apply to the 

2 operation of such a program from State funds 

3 an amount equivalent to the portion of State 

4 funds derived from State premium assessments 

5 (as defined by the Secretary) that are not oth6 erwise used on State health care programs. 

7 (2) RELATION TO CURRENT QUALIFIED HIGH

8 RISK POOL PROGRAM.— 

9 (A) STATES NOT OPERATING A QUALIFIED

10 HIGH RISK POOL.—In the case of a State that 

11 is not operating a current section 2745 quali12 fied high risk pool as of the date of the enact13 ment of this Act— 

14 (i) the State may only meet the re15 quirement of paragraph (1) through the 

16 operation of a qualified State reinsurance 

17 program described in subsection (b); and 

18 (ii) the State’s operation of such a re19 insurance program shall be treated, for 

20 purposes of section 2745 of the Public 

21 Health Service Act, as the operation of a 

22 qualified high risk pool described in such 

23 section. 

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1 erating a current section 2745 qualified high 

2 risk pool as of the date of the enactment of this 

3 Act— 

4 (i) as of January 1, 2012, such a pool 

5 shall not be treated as a qualified high risk 

6 pool under section 2745 of the Public 

7 Health Service Act unless the pool is a 

8 qualifying State high risk pool described in 

9 subsection (c)(1); and 

10 (ii) the State may use premium as11 sessment funds described in paragraph 

12 (1)(B) to transition from operation of such 

13 a pool to operation of a qualified State re14 insurance program described in subsection 

15 (b). 

16 (3) APPLICATION OF FUNDS.—If the program 

17 or pool operated under paragraph (1)(A) is in strong 

18 fiscal health, as determined in accordance with 

19 standards established by the National Association of 

20 Insurance Commissioners and as approved by the 

21 State Insurance Commissioner involved, the require22 ment of paragraph (1)(B) shall be deemed to be 

23 met. 

24 (b) QUALIFIED STATE REINSURANCE PROGRAM.— 


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1 (1) IN GENERAL.—For purposes of this section, 

2 a ‘‘qualified State reinsurance program’’ means a 

3 program operated by a State program that provides 

4 reinsurance for health insurance coverage offered in 

5 the small group market in accordance with the 

6 model for such a program established (as of the date 

7 of the enactment of this Act). 

8 (2) FORM OF PROGRAM.—A qualified State re9 insurance program may provide reinsurance— 

10 (A) on a prospective or retrospective basis; 

11 and 

12 (B) on a basis that protects health insur13 ance issuers against the annual aggregate 

14 spending of their enrollees as well as purchase 

15 protection against individual catastrophic costs. 

16 (3) SATISFACTION OF HIPAA REQUIREMENT.— 

17 A qualified State reinsurance program shall be 

18 deemed, for purposes of section 2745 of the Public 

19 Health Service Act, to be a qualified high risk pool 

20 under such section. 

21 (c) QUALIFYING STATE HIGH RISK POOL.— 

22 (1) IN GENERAL.—A qualifying State high risk 

23 pool described in this subsection means a current 

24 section 2745 qualified high risk pool that meets the 

25 following requirements: 


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1 (A) The pool must provide at least two 

2 coverage options, one of which must be a high 

3 deductible health plan coupled with a health 

4 savings account. 

5 (B) The pool must be funded with a stable 

6 funding source. 

7 (C) The pool must eliminate any waiting 

8 lists so that all eligible residents who are seek9 ing coverage through the pool should be allowed 

10 to receive coverage through the pool. 

11 (D) The pool must allow for coverage of 

12 individuals who, but for the 24-month disability 

13 waiting period under section 226(b) of the So14 cial Security Act, would be eligible for Medicare 

15 during the period of such waiting period. 

16 (E) The pool must limit the pool premiums 

17 to no more than 150 percent of the average 

18 premium for applicable standard risk rates in 

19 that State. 

20 (F) The pool must conduct education and 

21 outreach initiatives so that residents and bro22 kers understand that the pool is available to eli23 gible residents. 


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1 (G) The pool must provide coverage for 

2 preventive services and disease management for 

3 chronic diseases. 

4 (2) VERIFICATION OF CITIZENSHIP OR ALIEN

5 QUALIFICATION.— 

6 (A) IN GENERAL.—Notwithstanding any 

7 other provision of law, only citizens and nation8 als of the United States shall be eligible to par9 ticipate in a qualifying State high risk pool that 

10 receives funds under section 2745 of the Public 

11 Health Service Act or this section. 

12 (B) CONDITION OF PARTICIPATION.—As a 

13 condition of a State receiving such funds, the 

14 Secretary shall require the State to certify, to 

15 the satisfaction of the Secretary, that such 

16 State requires all applicants for coverage in the 

17 qualifying State high risk pool to provide satis18 factory documentation of citizenship or nation19 ality in a manner consistent with section 

20 1903(x) of the Social Security Act. 

21 (C) RECORDS.—The Secretary shall keep 

22 sufficient records such that a determination of 

23 citizenship or nationality only has to be made 

24 once for any individual under this paragraph. 


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1 (3) RELATION TO SECTION 2745.—As of Janu2 ary 1, 2012, a pool shall not qualify as qualified 

3 high risk pool under section 2745 of the Public 

4 Health Service Act unless the pool is a qualifying 

5 State high risk pool described in paragraph (1). 

6 (d) WAIVERS.—In order to accommodate new and in7 novative programs, the Secretary may waive such require8 ments of this section for qualified State reinsurance pro9 grams and for qualifying State high risk pools as the Sec10 retary deems appropriate. 

11 (e) FUNDING.—In addition to any other amounts ap12 propriated, there is appropriated to carry out section 2745 

13 of the Public Health Service Act (including through a pro14 gram or pool described in subsection (a)(1))— 

15 (1) $15,000,000,000 for the period of fiscal 

16 years 2012 through 2021; and 

17 (2) an additional $10,000,000,000 for the pe18 riod of fiscal years 2017 through 2021. 

19 (f) DEFINITIONS.—In this section: 

20 (1) HEALTH INSURANCE COVERAGE; HEALTH

21 INSURANCE ISSUER.—The terms ‘‘health insurance 

22 coverage’’ and ‘‘health insurance issuer’’ have the 

23 meanings given such terms in section 2791 of the 

24 Public Health Service Act. 


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1 (2) CURRENT SECTION 2745 QUALIFIED HIGH

2 RISK POOL.—The term ‘‘current section 2745 quali3 fied high risk pool’’ has the meaning given the term 

4 ‘‘qualified high risk pool’’ under section 2745(g) of 

5 the Public Health Service Act as in effect as of the 

6 date of the enactment of this Act. 

7 (3) SECRETARY.—The term ‘‘Secretary’’ means 

8 Secretary of Health and Human Services. 

9 (4) STANDARD RISK RATE.—The term ‘‘stand10 ard risk rate’’ means a rate that— 

11 (A) is determined under the State high 

12 risk pool by considering the premium rates 

13 charged by other health insurance issuers offer14 ing health insurance coverage to individuals in 

15 the insurance market served; 

16 (B) is established using reasonable actu17 arial techniques; and 

18 (C) reflects anticipated claims experience 

19 and expenses for the coverage involved. 

20 (5) STATE.—The term ‘‘State’’ means any of 

21 the 50 States or the District of Columbia. 


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1 SEC. 602. ELIMINATION OF CERTAIN REQUIREMENTS FOR 

2 GUARANTEED AVAILABILITY IN INDIVIDUAL 

3 MARKET. 

4 (a) IN GENERAL.—Section 2741(b) of the Public 

5 Health Service Act (42 U.S.C. 300gg–41(b)) is amend6 ed— 

7 (1) in paragraph (1)— 

8 (A) by striking ‘‘(1)(A)’’ and inserting 

9 ‘‘(1)’’; and 

10 (B) by striking ‘‘and (B)’’ and all that fol11 lows up to the semicolon at the end; 

12 (2) by adding ‘‘and’’ at the end of paragraph 

13 (2); 

14 (3) in paragraph (3)— 

15 (A) by striking ‘‘(1)(A)’’ and inserting 

16 ‘‘(1)’’; and 

17 (B) by striking the semicolon at the end 

18 and inserting a period; and 

19 (4) by striking paragraphs (4) and (5). 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 subsection (a) shall take effect on the date of the enact22 ment of this Act. 

23 SEC. 603. NO ANNUAL OR LIFETIME SPENDING CAPS. 

24 (a) IN GENERAL.—Notwithstanding any other provi25 sion of law, a health insurance issuer (including an entity 

26 licensed to sell insurance with respect to a State or group 


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1 health plan) may not apply an annual or lifetime aggre2 gate spending cap on any health insurance coverage or 

3 plan offered by such issuer. The restriction of the previous 

4 sentence shall not apply with respect to a health insurance 

5 coverage or plan if, as of the date of the enactment of 

6 this Act, it would result in a significant decrease in access 

7 to benefits under the plan or would significantly increase 

8 premiums under the plan. 

9 (b) APPLICATION.—Subsection (a) shall be enforced 

10 as if it were included as a provision in parts A and B 

11 of title XXVII of the Public Health Service Act (as such 

12 title is in effect after the date of repeal of Public Law 

13 111–148 under section 101). 

14 SEC. 604. PREVENTING UNJUST CANCELLATION OF INSUR15 ANCE COVERAGE. 

16 (a) CLARIFICATION REGARDING APPLICATION OF

17 GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH

18 INSURANCE COVERAGE.—Section 2742 of the Public 

19 Health Service Act (42 U.S.C. 300gg–42) is amended— 

20 (1) in its heading, by inserting ‘‘, CONTINU21 ATION IN FORCE, INCLUDING PROHIBITION OF

22 RESCISSION,’’ after ‘‘GUARANTEED RENEW23 ABILITY’’; 

24 (2) in subsection (a), by inserting ‘‘, including 

25 without rescission,’’ after ‘‘continue in force’’; and 


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1 (3) in subsection (b)(2), by inserting before the 

2 period at the end the following: ‘‘, including inten3 tional concealment of material facts regarding a 

4 health condition related to the condition for which 

5 coverage is being claimed’’. 

6 (b) OPPORTUNITY FOR INDEPENDENT, EXTERNAL

7 THIRD PARTY REVIEW IN CERTAIN CASES.—Subpart 1 

8 of part B of title XXVII of the Public Health Service Act 

9 is amended by adding at the end the following new section: 

10 ‘‘SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL 

11 THIRD PARTY REVIEW IN CERTAIN CASES. 

12 ‘‘(a) NOTICE AND REVIEW RIGHT.—If a health in13 surance issuer determines to nonrenew or not continue in 

14 force, including rescind, health insurance coverage for an 

15 individual in the individual market on the basis described 

16 in section 2742(b)(2) before such nonrenewal, discontinu17 ation, or rescission, may take effect the issuer shall pro18 vide the individual with notice of such proposed non19 renewal, discontinuation, or rescission and an opportunity 

20 for a review of such determination by an independent, ex21 ternal third party under procedures specified by the Sec22 retary. 

23 ‘‘(b) INDEPENDENT DETERMINATION.—If the indi24 vidual requests such review by an independent, external 

25 third party of a nonrenewal, discontinuation, or rescission 


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1 of health insurance coverage, the coverage shall remain in 

2 effect until such third party determines that the coverage 

3 may be nonrenewed, discontinued, or rescinded under sec4 tion 2742(b)(2).’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply after the date of the enactment 

7 of this Act with respect to health insurance coverage 

8 issued before, on, or after such date. 

9 CHAPTER 2—REDUCING HEALTH CARE 

10 PREMIUMS AND THE NUMBER OF UN11 INSURED AMERICANS 

12 SEC. 611. STATE INNOVATION PROGRAMS. 

13 (a) PROGRAMS THAT REDUCE THE COST OF

14 HEALTH INSURANCE PREMIUMS.— 

15 (1) PAYMENTS TO STATES.— 

16 (A) FOR PREMIUM REDUCTIONS IN THE

17 SMALL GROUP MARKET.—If the Secretary de18 termines that a State has reduced the average 

19 per capita premium for health insurance cov20 erage in the small group market in year 3, in 

21 year 6, or year 9 (as defined in subsection (c)) 

22 below the premium baseline for such year (as 

23 defined paragraph (2)), the Secretary shall pay 

24 the State an amount equal to the product of— 


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1 (i) bonus premium percentage (as de2 fined in paragraph (3)) for the State, mar3 ket, and year; and 

4 (ii) the maximum State premium pay5 ment amount (as defined in paragraph (4)) 

6 for the State, market, and year. 

7 (B) FOR PREMIUM REDUCTIONS IN THE

8 INDIVIDUAL MARKET.—If the Secretary deter9 mines that a State has reduced the average per 

10 capita premium for health insurance coverage 

11 in the individual market in year 3, in year 6, 

12 or in year 9 below the premium baseline for 

13 such year, the Secretary shall pay the State an 

14 amount equal to the product of— 

15 (i) bonus premium percentage for the 

16 State, market, and year; and 

17 (ii) the maximum State premium pay18 ment amount for the State, market, and 

19 year. 

20 (2) PREMIUM BASELINE.—For purposes of this 

21 subsection, the term ‘‘premium baseline’’ means, for 

22 a market in a State— 

23 (A) for year 1, the average per capita pre24 miums for health insurance coverage in such 

25 market in the State in such year; or 


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1 (B) for a subsequent year, the baseline for 

2 the market in the State for the previous year 

3 under this paragraph increased by a percentage 

4 specified in accordance with a formula estab5 lished by the Secretary, in consultation with the 

6 Congressional Budget Office and the Bureau of 

7 the Census, that takes into account at least the 

8 following: 

9 (i) GROWTH FACTOR.—The inflation 

10 in the costs of inputs to health care serv11 ices in the year. 

12 (ii) HISTORIC PREMIUM GROWTH

13 RATES.—Historic growth rates, during the 

14 10 years before year 1, of per capita pre15 miums for health insurance coverage. 

16 (iii) DEMOGRAPHIC CONSIDER17 ATIONS.—Historic average changes in the 

18 demographics of the population covered 

19 that impact on the rate of growth of per 

20 capita health care costs. 

21 (3) BONUS PREMIUM PERCENTAGE DEFINED.— 

22 (A) IN GENERAL.—For purposes of this 

23 subsection, the term ‘‘bonus premium percent24 age’’ means, for the small group market or indi25 vidual market in a State for a year, such perVerDate Mar 15 2010 23:44 Dec 22, 2011 Jkt 019200 PO 00000 Frm 00105 Fmt 6652 Sfmt 6201 E:\BILLS\H3682.IH H3682

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1 centage as determined in accordance with the 

2 following table based on the State’s premium 

3 performance level (as defined in subparagraph 

4 (B)) for such market and year: 

The bonus 

premium percentage for a 

State is— 

For year 3 if the 

premium performance level of the 

State is— 

For year 6 if the 

premium performance level of the 

State is— 

For year 9 if the 

premium performance level of the 

State is— 

100 percent at least 8.5% at least 11% at least 13.5% 

50 percent at least 6.38%, 

but less than 8.5% 

at least 10.38%, 

but less than 11% 

at least 12.88%, 

but less than 

13.5% 

25 percent at least 4.25%, 

but less than 

6.38% 

at least 9.75%, 

but less than 

10.38% 

at least 12.25%, 

but less than 

12.88% 

0 percent less than 4.25% less than 9.75% less than 12.25%. 

5 (B) PREMIUM PERFORMANCE LEVEL.—For 

6 purposes of this subsection, the term ‘‘premium 

7 performance level’’ means, for a State, market, 

8 and year, the percentage reduction in the aver9 age per capita premiums for health insurance 

10 coverage for the State, market, and year, as 

11 compared to the premium baseline for such 

12 State, market, and year. 

13 (4) MAXIMUM STATE PREMIUM PAYMENT

14 AMOUNT DEFINED.—For purposes of this sub15 section, the term ‘‘maximum State premium pay16 ment amount’’ means, for a State for the small 


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1 group market or the individual market for a year, 

2 the product of— 

3 (A) the proportion (as determined by the 

4 Secretary), of the number of nonelderly individ5 uals lawfully residing in all the States who are 

6 enrolled in health insurance coverage in the re7 spective market in the year, who are residents 

8 of the State; and 

9 (B) the amount available for obligation 

10 from amounts appropriated under subsection 

11 (d) for such market with respect to perform12 ance in such year. 

13 (5) METHODOLOGY FOR CALCULATING AVER14 AGE PER CAPITA PREMIUMS.— 

15 (A) ESTABLISHMENT.—The Secretary 

16 shall establish, by rule and consistent with this 

17 subsection, a methodology for computing the 

18 average per capita premiums for health insur19 ance coverage for the small group market and 

20 for the individual market in each State for each 

21 year beginning with year 1. 

22 (B) ADJUSTMENTS.—Under such method23 ology, the Secretary shall provide for the fol24 lowing adjustments (in a manner determined 

25 appropriate by the Secretary): 


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1 (i) EXCLUSION OF ILLEGAL ALIENS.— 

2 An adjustment so as not to take into ac3 count enrollees who are not lawfully 

4 present in the United States and their pre5 mium costs. 

6 (ii) TREATING STATE PREMIUM SUB7 SIDIES AS PREMIUM COSTS.—An adjust8 ment so as to increase per capita pre9 miums to remove the impact of premium 

10 subsidies made directly by a State to re11 duce health insurance premiums. 

12 (6) CONDITIONS OF PAYMENT.—As a condition 

13 of receiving a payment under paragraph (1), a State 

14 must agree to submit aggregate, non-individually 

15 identifiable data to the Secretary, in a form and 

16 manner specified by the Secretary, for use by the 

17 Secretary to determine the State’s premium baseline 

18 and premium performance level for purposes of this 

19 subsection. 

20 (b) PROGRAMS THAT REDUCE THE NUMBER OF UN21 INSURED.— 

22 (1) IN GENERAL.—If the Secretary determines 

23 that a State has reduced the percentage of unin24 sured nonelderly residents in year 5, year 7, or year 

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1 graph (2)) for the State for the year, the Secretary 

2 shall pay the State an amount equal to the product 

3 of— 

4 (A) bonus uninsured percentage (as de5 fined in paragraph (3)) for the State and year; 

6 and 

7 (B) the maximum uninsured payment 

8 amount (as defined in paragraph (4)) for the 

9 State and year. 

10 (2) UNINSURED BASELINE.— 

11 (A) IN GENERAL.—For purposes of this 

12 subsection, and subject to subparagraph (B), 

13 the term ‘‘uninsured baseline’’ means, for a 

14 State, the percentage of nonelderly residents in 

15 the State who are uninsured in year 1. 

16 (B) ADJUSTMENT.—The Secretary may, at 

17 the written request of a State, adjust the unin18 sured baseline for States for a year to take into 

19 account unanticipated and exceptional changes, 

20 such as an unanticipated migration, of non21 elderly individuals into, or out of, States in a 

22 manner that does not reflect substantially the 

23 proportion of uninsured nonelderly residents in 

24 the States involved in year 1. Any such adjust25 ment shall only be done in a manner that does 


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1 not result in the average of the uninsured base2 lines for nonelderly residents for all States 

3 being changed. 

4 (3) BONUS UNINSURED PERCENTAGE.— 

5 (A) BONUS UNINSURED PERCENTAGE.— 

6 For purposes of this subsection, the term 

7 ‘‘bonus uninsured percentage’’ means, for a 

8 State for a year, such percentage as determined 

9 in accordance with the following table, based on 

10 the uninsured performance level (as defined in 

11 subparagraph (B)) for such State and year: 

The bonus uninsured percentage for a 

State is— 

For year 5 if the 

uninsured performance level of 

the State is— 

For year 7 if the 

uninsured performance level of 

the State is— 

For year 9 if the 

uninsured performance level of 

the State is— 

100 percent at least 10% at least 15% at least 20% 

50 percent at least 7.5% but 

less than 10% 

at least 13.75% 

but less than 15% 

at least 18.75% 

but less than 20% 

25 percent at least 5% but 

less than 7.5% 

at least 12.5% but 

less than 13.75% 

at least 17.5% but 

less than 18.75% 

0 percent less than 5% less than 12.5% less than 17.5%. 

12 (B) UNINSURED PERFORMANCE LEVEL.— 

13 For purposes of this subsection, the term ‘‘un14 insured performance level’’ means, for a State 

15 for a year, the reduction (expressed as a per16 centage) in the percentage of uninsured non17 elderly residents in such State in the year as 


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1 compared to the uninsured baseline for such 

2 State for such year. 

3 (4) MAXIMUM STATE UNINSURED PAYMENT

4 AMOUNT DEFINED.—For purposes of this sub5 section, the term ‘‘maximum State uninsured pay6 ment amount’’ means, for a State for a year, the 

7 product of— 

8 (A) the proportion (as determined by the 

9 Secretary), of the number of uninsured non10 elderly individuals lawfully residing in all the 

11 States in the year, who are residents of the 

12 State; and 

13 (B) the amount available for obligation 

14 under this subsection from amounts appro15 priated under subsection (d) with respect to 

16 performance in such year. 

17 (5) METHODOLOGY FOR COMPUTING THE PER18 CENTAGE OF UNINSURED NONELDERLY RESIDENTS

19 IN A STATE.— 

20 (A) ESTABLISHMENT.—The Secretary 

21 shall establish, by rule and consistent with this 

22 subsection, a methodology for computing the 

23 percentage of nonelderly residents in a State 

24 who are uninsured in each year beginning with 

25 year 1. 


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1 (B) RULES.— 

2 (i) TREATMENT OF UNINSURED.— 

3 Such methodology shall treat as uninsured 

4 those residents who do not have health in5 surance coverage or other creditable cov6 erage (as defined in section 9801(c)(1) of 

7 the Internal Revenue Code of 1986), ex8 cept that such methodology shall rely upon 

9 data on the nonelderly and uninsured pop10 ulations within each State in such year 

11 provided through population surveys con12 ducted by federal agencies. 

13 (ii) LIMITATION TO NONELDERLY.— 

14 Such methodology shall exclude individuals 

15 who are 65 years of age or older. 

16 (iii) EXCLUSION OF ILLEGAL

17 ALIENS.—Such methodology shall exclude 

18 individuals not lawfully present in the 

19 United States. 

20 (6) CONDITIONS OF PAYMENT.—As a condition 

21 of receiving a payment under paragraph (1), a State 

22 must agree to submit aggregate, non-individually 

23 identifiable data to the Secretary, in a form and 

24 manner specified by the Secretary, for use by the 

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1 line and uninsured performance level for purposes of 

2 this subsection. 

3 (c) DEFINITIONS.—For purposes of this section: 

4 (1) GROUP HEALTH PLAN.—The term ‘‘group 

5 health plan’’ has the meaning given such term in 

6 section 9832(a) of the Internal Revenue Code of 

7 1986. 

8 (2) HEALTH INSURANCE COVERAGE.—The term 

9 ‘‘health insurance coverage’’ has the meaning given 

10 such term in section 9832(b)(1) of the Internal Rev11 enue Code of 1986. 

12 (3) INDIVIDUAL MARKET.—Except as the Sec13 retary may otherwise provide in the case of group 

14 health plans that have fewer than 2 participants as 

15 current employees on the first day of a plan year, 

16 the term ‘‘individual market’’ means the market for 

17 health insurance coverage offered to individuals 

18 other than in connection with a group health plan. 

19 (4) SECRETARY.—The term ‘‘Secretary’’ means 

20 the Secretary of Health and Human Services. 

21 (5) SMALL GROUP MARKET.—The term ‘‘small 

22 group market’’ means the market for health insur23 ance coverage under which individuals obtain health 

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1 ents) through a group health plan maintained by an 

2 employer who employed on average at least 2 but 

3 not more than 50 employees on business days during 

4 a calendar year. 

5 (6) STATE.—The term ‘‘State’’ means any of 

6 the 50 States and the District of Columbia. 

7 (7) YEARS.—The terms ‘‘year 1’’, ‘‘year 2’’, 

8 ‘‘year 3’’, and similar subsequently numbered years 

9 mean 2012, 2013, 2014, and subsequent sequen10 tially numbered years. 

11 (d) APPROPRIATIONS; PAYMENTS.— 

12 (1) PAYMENTS FOR REDUCTIONS IN COST OF

13 HEALTH INSURANCE COVERAGE.— 

14 (A) SMALL GROUP MARKET.— 

15 (i) IN GENERAL.—From any funds in 

16 the Treasury not otherwise appropriated, 

17 there is appropriated for payments under 

18 subsection (a)(1)(A)— 

19 (I) $18,000,000,000 with respect 

20 to performance in year 3; 

21 (II) $5,000,000,000 with respect 

22 to performance in year 6; and 

23 (III) $2,000,000,000 with re24 spect to performance in year 9. 


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1 (ii) AVAILABILITY OF APPROPRIATED

2 FUNDS.—Funds appropriated under clause 

3 (i) shall remain available until expended. 

4 (B) INDIVIDUAL MARKET.— 

5 (i) IN GENERAL.—Subject to clause 

6 (ii), from any funds in the Treasury not 

7 otherwise appropriated, there is appro8 priated for payments under subsection 

9 (a)(1)(B)— 

10 (I) $7,000,000,000 with respect 

11 to performance in year 3; 

12 (II) $2,000,000,000 with respect 

13 to performance in year 6; and 

14 (III) $1,000,000,000 with re15 spect to performance in year 9. 

16 (ii) AVAILABILITY OF APPROPRIATED

17 FUNDS.—Of the funds appropriated under 

18 clause (i) that are not expended or obli19 gated by the end of the year following the 

20 year for which the funds are appro21 priated— 

22 (I) 75 percent shall remain avail23 able until expended for payments 

24 under subsection (a)(1)(B); and 


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1 (II) 25 percent shall remain 

2 available until expended for payments 

3 under subsection (a)(1)(A). 

4 (2) PAYMENTS FOR REDUCTIONS IN THE PER5 CENTAGE OF UNINSURED.— 

6 (A) IN GENERAL.—From any funds in the 

7 Treasury not otherwise appropriated, there is 

8 appropriated for payments under subsection 

9 (b)(1)— 

10 (i) $10,000,000,000 with respect to 

11 performance in year 5; 

12 (ii) $3,000,000,000 with respect to 

13 performance in year 7; and 

14 (iii) $2,000,000,000 with respect to 

15 performance in year 9. 

16 (B) AVAILABILITY OF APPROPRIATED

17 FUNDS.—Funds appropriated under subpara18 graph (A) shall remain available until expended. 

19 (3) PAYMENT TIMING.—Payments under this 

20 section shall be made in a form and manner speci21 fied by the Secretary in the year after the perform22 ance year involved. 

23 SEC. 612. HEALTH PLAN FINDERS. 

24 (a) STATE PLAN FINDERS.—Not later than 12 

25 months after the date of the enactment of this Act, each 


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1 State may contract with a private entity to develop and 

2 operate a plan finder website (referred to in this section 

3 as a ‘‘State plan finder’’) which shall provide information 

4 to individuals in such State on plans of health insurance 

5 coverage that are available to individuals in such State (in 

6 this section referred to as a ‘‘health insurance plan’’). 

7 Such State may not operate a plan finder itself. 

8 (b) MULTI-STATE PLAN FINDERS.— 

9 (1) IN GENERAL.—A private entity may operate 

10 a multi-State finder that operates under this section 

11 in the States involved in the same manner as a State 

12 plan finder would operate in a single State. 

13 (2) SHARING OF INFORMATION.—States shall 

14 regulate the manner in which data is shared between 

15 plan finders to ensure consistency and accuracy in 

16 the information about health insurance plans con17 tained in such finders. 

18 (c) REQUIREMENTS FOR PLAN FINDERS.—Each plan 

19 finder shall meet the following requirements: 

20 (1) The plan finder shall ensure that each 

21 health insurance plan in the plan finder meets the 

22 requirements for such plans under subsection (d). 

23 (2) The plan finder shall present complete in24 formation on the costs and benefits of health insur25 ance plans (including information on monthly preVerDate Mar 15 2010 23:44 Dec 22, 2011 Jkt 019200 PO 00000 Frm 00117 Fmt 6652 Sfmt 6201 E:\BILLS\H3682.IH H3682

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1 mium, copayments, and deductibles) in a uniform 

2 manner that— 

3 (A) uses the standard definitions developed 

4 under paragraph (3); and 

5 (B) is designed to allow consumers to eas6 ily compare such plans. 

7 (3) The plan finder shall be available on the 

8 Internet and accessible to all individuals in the State 

9 or, in the case of a multi-State plan finder, in all 

10 States covered by the multi-State plan finder. 

11 (4) The plan finder shall allow consumers to 

12 search and sort data on the health insurance plans 

13 in the plan finder on criteria such as coverage of 

14 specific benefits (such as coverage of disease man15 agement services or pediatric care services), as well 

16 as data available on quality. 

17 (5) The plan finder shall meet all relevant State 

18 laws and regulations, including laws and regulations 

19 related to the marketing of insurance products. In 

20 the case of a multi-State plan finder, the finder shall 

21 meet such laws and regulations for all of the States 

22 involved. 

23 (6) The plan finder shall meet solvency, finan24 cial, and privacy requirements established by the 


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1 State or States in which the plan finder operates or 

2 the Secretary for multi-State finders. 

3 (7) The plan finder and the employees of the 

4 plan finder shall be appropriately licensed in the 

5 State or States in which the plan finder operates, if 

6 such licensure is required by such State or States. 

7 (8) Notwithstanding subsection (f)(1), the plan 

8 finder shall assist individuals who are eligible for the 

9 Medicaid program under title XIX of the Social Se10 curity Act or State Children’s Health Insurance Pro11 gram under title XXI of such Act by including infor12 mation on Medicaid options, eligibility, and how to 

13 enroll. 

14 (d) REQUIREMENTS FOR PLANS PARTICIPATING IN

15 A PLAN FINDER.— 

16 (1) IN GENERAL.—Each State shall ensure that 

17 health insurance plans participating in the State 

18 plan finder or in a multi-State plan finder meet the 

19 requirements of paragraph (2) (relating to adequacy 

20 of insurance coverage, consumer protection, and fi21 nancial strength). 

22 (2) SPECIFIC REQUIREMENTS.—In order to 

23 participate in a plan finder, a health insurance plan 

24 must meet all of the following requirements, as de25 termined by each State in which such plan operates: 


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1 (A) The health insurance plan shall be ac2 tuarially sound. 

3 (B) The health insurance plan may not 

4 have a history of abusive policy rescissions. 

5 (C) The health insurance plan shall meet 

6 financial and solvency requirements. 

7 (D) The health insurance plan shall dis8 close— 

9 (i) all financial arrangements involv10 ing the sale and purchase of health insur11 ance, such as the payment of fees and 

12 commissions; and 

13 (ii) such arrangements may not be 

14 abusive. 

15 (E) The health insurance plan shall main16 tain electronic health records that comply with 

17 the requirements of the American Recovery and 

18 Reinvestment Act of 2009 (Public Law 111–5) 

19 related to electronic health records. 

20 (F) The health insurance plan shall make 

21 available to plan enrollees via the finder, wheth22 er by information provided to the finder or by 

23 a website link directing the enrollee from the 

24 finder to the health insurance plan website, 

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1 dividual of services offered by a provider ac2 cording to the terms and conditions of the 

3 health plan. Data described in this paragraph is 

4 not made public by the finder, only made avail5 able to the individual once enrolled in the 

6 health plan. 

7 (e) PROHIBITIONS.— 

8 (1) DIRECT ENROLLMENT.—The State plan 

9 finder may not directly enroll individuals in health 

10 insurance plans. 

11 (2) CONFLICTS OF INTEREST.— 

12 (A) COMPANIES.—A health insurance 

13 issuer offering a health insurance plan through 

14 a plan finder may not— 

15 (i) be the private entity developing 

16 and maintaining a plan finder under sub17 sections (a) and (b); or 

18 (ii) have an ownership interest in such 

19 private entity or in the plan finder. 

20 (B) INDIVIDUALS.—An individual em21 ployed by a health insurance issuer offering a 

22 health insurance plan through a plan finder 

23 may not serve as a director or officer for— 


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1 (i) the private entity developing and 

2 maintaining a plan finder under sub3 sections (a) and (b); or 

4 (ii) the plan finder. 

5 (f) CONSTRUCTION.—Nothing in this section shall be 

6 construed to allow the Secretary authority to regulate ben7 efit packages or to prohibit health insurance brokers and 

8 agents from— 

9 (1) utilizing the plan finder for any purpose; or 

10 (2) marketing or offering health insurance 

11 products. 

12 (g) PLAN FINDER DEFINED.—For purposes of this 

13 section, the term ‘‘plan finder’’ means a State plan finder 

14 under subsection (a) or a multi-State plan finder under 

15 subsection (b). 

16 (h) STATE DEFINED.—In this section, the term 

17 ‘‘State’’ has the meaning given such term for purposes of 

18 title XIX of the Social Security Act. 

19 SEC. 613. ADMINISTRATIVE SIMPLIFICATION. 

20 (a) OPERATING RULES FOR HEALTH INFORMATION

21 TRANSACTIONS.— 

22 (1) DEFINITION OF OPERATING RULES.—Sec23 tion 1171 of the Social Security Act (42 U.S.C. 

24 1320d) is amended by adding at the end the fol25 lowing: 


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1 ‘‘(9) OPERATING RULES.—The term ‘operating 

2 rules’ means the necessary business rules and guide3 lines for the electronic exchange of information that 

4 are not defined by a standard or its implementation 

5 specifications as adopted for purposes of this part.’’. 

6 (2) OPERATING RULES AND COMPLIANCE.— 

7 Section 1173 of the Social Security Act (42 U.S.C. 

8 1320d–2) is amended— 

9 (A) in subsection (a)(2), by adding at the 

10 end the following new subparagraph: 

11 ‘‘(J) Electronic funds transfers.’’; and 

12 (B) by adding at the end the following new 

13 subsections: 

14 ‘‘(g) OPERATING RULES.— 

15 ‘‘(1) IN GENERAL.—The Secretary shall adopt 

16 a single set of operating rules for each transaction 

17 described in subsection (a)(2) with the goal of cre18 ating as much uniformity in the implementation of 

19 the electronic standards as possible. Such operating 

20 rules shall be consensus-based and reflect the nec21 essary business rules affecting health plans and 

22 health care providers and the manner in which they 

23 operate pursuant to standards issued under Health 

24 Insurance Portability and Accountability Act of 

25 1996. 


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1 ‘‘(2) OPERATING RULES DEVELOPMENT.—In 

2 adopting operating rules under this subsection, the 

3 Secretary shall rely on recommendations for oper4 ating rules developed by a qualified nonprofit entity, 

5 as selected by the Secretary, that meets the fol6 lowing requirements: 

7 ‘‘(A) The entity focuses its mission on ad8 ministrative simplification. 

9 ‘‘(B) The entity demonstrates an estab10 lished multi-stakeholder and consensus-based 

11 process for development of operating rules, in12 cluding representation by or participation from 

13 health plans, health care providers, vendors, rel14 evant Federal agencies, and other standard de15 velopment organizations. 

16 ‘‘(C) The entity has established a public 

17 set of guiding principles that ensure the oper18 ating rules and process are open and trans19 parent. 

20 ‘‘(D) The entity coordinates its activities 

21 with the HIT Policy Committee and the HIT 

22 Standards Committee (as established under 

23 title XXX of the Public Health Service Act) 

24 and complements the efforts of the Office of the 


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1 National Healthcare Coordinator and its related 

2 health information exchange goals. 

3 ‘‘(E) The entity incorporates national 

4 standards, including the transaction standards 

5 issued under Health Insurance Portability and 

6 Accountability Act of 1996. 

7 ‘‘(F) The entity supports nondiscrimina8 tion and conflict of interest policies that dem9 onstrate a commitment to open, fair, and non10 discriminatory practices. 

11 ‘‘(G) The entity allows for public review 

12 and updates of the operating rules. 

13 ‘‘(3) REVIEW AND RECOMMENDATIONS.—The 

14 National Committee on Vital and Health Statistics 

15 shall— 

16 ‘‘(A) review the operating rules developed 

17 by a nonprofit entity described under paragraph 

18 (2); 

19 ‘‘(B) determine whether such rules rep20 resent a consensus view of the health care in21 dustry and are consistent with and do not alter 

22 current standards; 

23 ‘‘(C) evaluate whether such rules are con24 sistent with electronic standards adopted for 

25 health information technology; and 


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1 ‘‘(D) submit to the Secretary a rec2 ommendation as to whether the Secretary 

3 should adopt such rules. 

4 ‘‘(4) IMPLEMENTATION.— 

5 ‘‘(A) IN GENERAL.—The Secretary shall 

6 adopt operating rules under this subsection, by 

7 regulation in accordance with subparagraph 

8 (C), following consideration of the rules devel9 oped by the non-profit entity described in para10 graph (2) and the recommendation submitted 

11 by the National Committee on Vital and Health 

12 Statistics under paragraph (3)(D) and having 

13 ensured consultation with providers. 

14 ‘‘(B) ADOPTION REQUIREMENTS; EFFEC15 TIVE DATES.— 

16 ‘‘(i) ELIGIBILITY FOR A HEALTH

17 PLAN AND HEALTH CLAIM STATUS.—The 

18 set of operating rules for transactions for 

19 eligibility for a health plan and health 

20 claim status shall be adopted not later 

21 than July 1, 2013, in a manner ensuring 

22 that such rules are effective not later than 

23 January 1, 2015, and may allow for the 

24 use of a machine readable identification 

25 card. 


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1 ‘‘(ii) ELECTRONIC FUNDS TRANSFERS

2 AND HEALTH CARE PAYMENT AND REMIT3 TANCE ADVICE.—The set of operating 

4 rules for electronic funds transfers and 

5 health care payment and remittance advice 

6 shall be adopted not later than July 1, 

7 2014, in a manner ensuring that such 

8 rules are effective not later than January 

9 1, 2016. 

10 ‘‘(iii) OTHER COMPLETED TRANS11 ACTIONS.—The set of operating rules for 

12 the remainder of the completed trans13 actions described in subsection (a)(2), in14 cluding health claims or equivalent encoun15 ter information, enrollment and 

16 disenrollment in a health plan, health plan 

17 premium payments, and referral certifi18 cation and authorization, shall be adopted 

19 not later than July 1, 2016, in a manner 

20 ensuring that such rules are effective not 

21 later than January 1, 2018. 

22 ‘‘(C) EXPEDITED RULEMAKING.—The Sec23 retary shall promulgate an interim final rule 

24 applying any standard or operating rule rec25 ommended by the National Committee on Vital 


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1 and Health Statistics pursuant to paragraph 

2 (3). The Secretary shall accept public comments 

3 on any interim final rule published under this 

4 subparagraph for 60 days after the date of such 

5 publication. 

6 ‘‘(h) COMPLIANCE.— 

7 ‘‘(1) HEALTH PLAN CERTIFICATION.— 

8 ‘‘(A) ELIGIBILITY FOR A HEALTH PLAN, 

9 HEALTH CLAIM STATUS, ELECTRONIC FUNDS

10 TRANSFERS, HEALTH CARE PAYMENT AND RE11 MITTANCE ADVICE.—Not later than December 

12 31, 2015, a health plan shall file a statement 

13 with the Secretary, in such form as the Sec14 retary may require, certifying that the data and 

15 information systems for such plan are in com16 pliance with any applicable standards (as de17 scribed under paragraph (7) of section 1171) 

18 and operating rules (as described under para19 graph (9) of such section) for electronic funds 

20 transfers, eligibility for a health plan, health 

21 claim status, and health care payment and re22 mittance advice, respectively. 

23 ‘‘(B) OTHER COMPLETED TRANS24 ACTIONS.—Not later than December 31, 2017, 

25 a health plan shall file a statement with the 


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1 Secretary, in such form as the Secretary may 

2 require, certifying that the data and informa3 tion systems for such plan are in compliance 

4 with any applicable standards and operating 

5 rules for the remainder of the completed trans6 actions described in subsection (a)(2), including 

7 health claims or equivalent encounter informa8 tion, enrollment and disenrollment in a health 

9 plan, health plan premium payments, and refer10 ral certification and authorization, respectively. 

11 A health plan shall provide the same level of 

12 documentation to certify compliance with such 

13 transactions as is required to certify compliance 

14 with the transactions specified in subparagraph 

15 (A). 

16 ‘‘(2) DOCUMENTATION OF COMPLIANCE.—A 

17 health plan shall provide the Secretary, in such form 

18 as the Secretary may require, with adequate docu19 mentation of compliance with the standards and op20 erating rules described under paragraph (1). A 

21 health plan shall not be considered to have provided 

22 adequate documentation and shall not be certified as 

23 being in compliance with such standards, unless the 

24 health plan— 


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1 ‘‘(A) demonstrates to the Secretary that 

2 the plan conducts the electronic transactions 

3 specified in paragraph (1) in a manner that 

4 fully complies with the regulations of the Sec5 retary; and 

6 ‘‘(B) provides documentation showing that 

7 the plan has completed end-to-end testing for 

8 such transactions with their partners, such as 

9 hospitals and physicians. 

10 ‘‘(3) SERVICE CONTRACTS.—A health plan shall 

11 be required to comply with any applicable certifi12 cation and compliance requirements (and provide the 

13 Secretary with adequate documentation of such com14 pliance) under this subsection for any entities that 

15 provide services pursuant to a contract with such 

16 health plan. 

17 ‘‘(4) CERTIFICATION BY OUTSIDE ENTITY.— 

18 The Secretary may contract with an independent, 

19 outside entity to certify that a health plan has com20 plied with the requirements under this subsection, 

21 provided that the certification standards employed 

22 by such entities are in accordance with any stand23 ards or rules issued by the Secretary. 

24 ‘‘(5) COMPLIANCE WITH REVISED STANDARDS

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1 scribed under paragraph (3)) shall comply with the 

2 certification and documentation requirements under 

3 this subsection for any interim final rule promul4 gated by the Secretary under subsection (i) that 

5 amends any standard or operating rule described 

6 under paragraph (1) of this subsection. A health 

7 plan shall comply with such requirements not later 

8 than the effective date of the applicable interim final 

9 rule. 

10 ‘‘(6) AUDITS OF HEALTH PLANS.—The Sec11 retary shall conduct periodic audits to ensure that 

12 health plans (including entities described under 

13 paragraph (3)) are in compliance with any standards 

14 and operating rules that are described under para15 graph (1). 

16 ‘‘(i) REVIEW AND AMENDMENT OF STANDARDS AND

17 RULES.— 

18 ‘‘(1) ESTABLISHMENT.—Not later than Janu19 ary 1, 2016, the Secretary shall establish a review 

20 committee (as described under paragraph (4)). 

21 ‘‘(2) EVALUATIONS AND REPORTS.— 

22 ‘‘(A) HEARINGS.—Not later than April 1, 

23 2016, and not less than biennially thereafter, 

24 the Secretary, acting through the review com25 mittee, shall conduct hearings to evaluate and 


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1 review the existing standards and operating 

2 rules established under this section. 

3 ‘‘(B) REPORT.—Not later than July 1, 

4 2016, and not less than biennially thereafter, 

5 the review committee shall provide rec6 ommendations for updating and improving such 

7 standards and rules. The review committee 

8 shall recommend a single set of operating rules 

9 per transaction standard and maintain the goal 

10 of creating as much uniformity as possible in 

11 the implementation of the electronic standards. 

12 ‘‘(3) INTERIM FINAL RULEMAKING.— 

13 ‘‘(A) IN GENERAL.—Any recommendations 

14 to amend existing standards and operating 

15 rules that have been approved by the review 

16 committee and reported to the Secretary under 

17 paragraph (2)(B) shall be adopted by the Sec18 retary through promulgation of an interim final 

19 rule not later than 90 days after receipt of the 

20 committee’s report. 

21 ‘‘(B) PUBLIC COMMENT.— 

22 ‘‘(i) PUBLIC COMMENT PERIOD.—The 

23 Secretary shall accept public comments on 

24 any interim final rule published under this 


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1 paragraph for 60 days after the date of 

2 such publication. 

3 ‘‘(ii) EFFECTIVE DATE.—The effective 

4 date of any amendment to existing stand5 ards or operating rules that is adopted 

6 through an interim final rule published 

7 under this paragraph shall be 25 months 

8 following the close of such public comment 

9 period. 

10 ‘‘(4) REVIEW COMMITTEE.— 

11 ‘‘(A) DEFINITION.—For the purposes of 

12 this subsection, the term ‘review committee’ 

13 means a committee within the Department of 

14 Health and Human services that has been des15 ignated by the Secretary to carry out this sub16 section, including— 

17 ‘‘(i) the National Committee on Vital 

18 and Health Statistics; or 

19 ‘‘(ii) any appropriate committee as de20 termined by the Secretary. 

21 ‘‘(B) COORDINATION OF HIT STAND22 ARDS.—In developing recommendations under 

23 this subsection, the review committee shall con24 sider the standards approved by the Office of 


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1 the National Coordinator for Health Informa2 tion Technology. 

3 ‘‘(j) PENALTIES.— 

4 ‘‘(1) PENALTY FEE.— 

5 ‘‘(A) IN GENERAL.—Not later than April 

6 1, 2016, and annually thereafter, the Secretary 

7 shall assess a penalty fee (as determined under 

8 subparagraph (B)) against a health plan that 

9 has failed to meet the requirements under sub10 section (h) with respect to certification and doc11 umentation of compliance with the standards 

12 (and their operating rules) as described under 

13 paragraph (1) of such subsection. 

14 ‘‘(B) FEE AMOUNT.—Subject to subpara15 graphs (C), (D), and (E), the Secretary shall 

16 assess a penalty fee against a health plan in the 

17 amount of $1 per covered life until certification 

18 is complete. The penalty shall be assessed per 

19 person covered by the plan for which its data 

20 systems for major medical policies are not in 

21 compliance and shall be imposed against the 

22 health plan for each day that the plan is not in 

23 compliance with the requirements under sub24 section (h). 


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1 ‘‘(C) ADDITIONAL PENALTY FOR MIS2 REPRESENTATION.—A health plan that know3 ingly provides inaccurate or incomplete informa4 tion in a statement of certification or docu5 mentation of compliance under subsection (h) 

6 shall be subject to a penalty fee that is double 

7 the amount that would otherwise be imposed 

8 under this subsection. 

9 ‘‘(D) ANNUAL FEE INCREASE.—The 

10 amount of the penalty fee imposed under this 

11 subsection shall be increased on an annual basis 

12 by the annual percentage increase in total na13 tional health care expenditures, as determined 

14 by the Secretary. 

15 ‘‘(E) PENALTY LIMIT.—A penalty fee as16 sessed against a health plan under this sub17 section shall not exceed, on an annual basis— 

18 ‘‘(i) an amount equal to $20 per cov19 ered life under such plan; or 

20 ‘‘(ii) an amount equal to $40 per cov21 ered life under the plan if such plan has 

22 knowingly provided inaccurate or incom23 plete information (as described under sub24 paragraph (C)). 


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1 ‘‘(F) DETERMINATION OF COVERED INDI2 VIDUALS.—The Secretary shall determine the 

3 number of covered lives under a health plan 

4 based upon the most recent statements and fil5 ings that have been submitted by such plan to 

6 the Securities and Exchange Commission. 

7 ‘‘(2) NOTICE AND DISPUTE PROCEDURE.—The 

8 Secretary shall establish a procedure for assessment 

9 of penalty fees under this subsection that provides a 

10 health plan with reasonable notice and a dispute res11 olution procedure prior to provision of a notice of as12 sessment by the Secretary of the Treasury (as de13 scribed under paragraph (4)(B)). 

14 ‘‘(3) PENALTY FEE REPORT.—Not later than 

15 May 1, 2016, and annually thereafter, the Secretary 

16 shall provide the Secretary of the Treasury with a 

17 report identifying those health plans that have been 

18 assessed a penalty fee under this subsection. 

19 ‘‘(4) COLLECTION OF PENALTY FEE.— 

20 ‘‘(A) IN GENERAL.—The Secretary of the 

21 Treasury, acting through the Financial Man22 agement Service, shall administer the collection 

23 of penalty fees from health plans that have been 

24 identified by the Secretary in the penalty fee re25 port provided under paragraph (3). 


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1 ‘‘(B) NOTICE.—Not later than August 1, 

2 2016, and annually thereafter, the Secretary of 

3 the Treasury shall provide notice to each health 

4 plan that has been assessed a penalty fee by the 

5 Secretary under this subsection. Such notice 

6 shall include the amount of the penalty fee as7 sessed by the Secretary and the due date for 

8 payment of such fee to the Secretary of the 

9 Treasury (as described in subparagraph (C)). 

10 ‘‘(C) PAYMENT DUE DATE.—Payment by a 

11 health plan for a penalty fee assessed under 

12 this subsection shall be made to the Secretary 

13 of the Treasury not later than November 1, 

14 2016, and annually thereafter. 

15 ‘‘(D) UNPAID PENALTY FEES.—Any 

16 amount of a penalty fee assessed against a 

17 health plan under this subsection for which pay18 ment has not been made by the due date pro19 vided under subparagraph (C) shall be— 

20 ‘‘(i) increased by the interest accrued 

21 on such amount, as determined pursuant 

22 to the underpayment rate established 

23 under section 6601 of the Internal Rev24 enue Code of 1986; and 


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1 ‘‘(ii) treated as a past-due, legally en2 forceable debt owed to a Federal agency 

3 for purposes of section 6402(d) of the In4 ternal Revenue Code of 1986. 

5 ‘‘(E) ADMINISTRATIVE FEES.—Any fee 

6 charged or allocated for collection activities con7 ducted by the Financial Management Service 

8 will be passed on to a health plan on a pro-rata 

9 basis and added to any penalty fee collected 

10 from the plan.’’. 

11 (b) PROMULGATION OF RULES.— 

12 (1) UNIQUE HEALTH PLAN IDENTIFIER.—The 

13 Secretary shall promulgate a final rule to establish 

14 a unique health plan identifier (as described in sec15 tion 1173(b) of the Social Security Act (42 U.S.C. 

16 1320d–2(b))) based on the input of the National 

17 Committee of Vital and Health Statistics. The Sec18 retary may do so on an interim final basis and such 

19 rule shall be effective not later than October 1, 

20 2014. 

21 (2) ELECTRONIC FUNDS TRANSFER.—The Sec22 retary shall promulgate a final rule to establish a 

23 standard for electronic funds transfers (as described 

24 in section 1173(a)(2)(J) of the Social Security Act, 

25 as added by subsection (a)(2)(A)). The Secretary 


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1 may do so on an interim final basis and shall adopt 

2 such standard not later than January 1, 2014, in a 

3 manner ensuring that such standard is effective not 

4 later than January 1, 2016. 

5 (c) EXPANSION OF ELECTRONIC TRANSACTIONS IN

6 MEDICARE.—Section 1862(a) of the Social Security Act 

7 (42 U.S.C. 1395y(a)) is amended— 

8 (1) in paragraph (23), by striking the ‘‘or’’ at 

9 the end; 

10 (2) in paragraph (24), by striking the period 

11 and inserting ‘‘; or’’; and 

12 (3) by inserting after paragraph (24) the fol13 lowing new paragraph: 

14 ‘‘(25) not later than January 1, 2016, for 

15 which the payment is other than by electronic funds 

16 transfer (EFT) or an electronic remittance in a form 

17 as specified in ASC X12 835 Health Care Payment 

18 and Remittance Advice or subsequent standard.’’. 

19 (d) MEDICARE AND MEDICAID COMPLIANCE RE20 PORTS.—Not later than July 1, 2015, the Secretary of 

21 Health and Human Services shall submit a report to the 

22 chairs and ranking members of the Committee on Ways 

23 and Means and the Committee on Energy and Commerce 

24 of the House of Representatives and the chairs and rank25 ing members of the Committee on Health, Education, 


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1 Labor, and Pensions and the Committee on Finance of 

2 the Senate on the extent to which the Medicare program 

3 and providers that serve beneficiaries under that program, 

4 and State Medicaid programs and providers that serve 

5 beneficiaries under those programs, transact electronically 

6 in accordance with transaction standards issued under the 

7 Health Insurance Portability and Accountability Act of 

8 1996, part C of title XI of the Social Security Act, and 

9 regulations promulgated under such Acts. 

10 Subtitle B—Improving Access to 

11 Health Care 

12 CHAPTER 1—EXPANDING ACCESS AND 

13 LOWERING COSTS FOR SMALL BUSI14 NESSES 

15 SEC. 620. SHORT TITLE. 

16 This chapter may be cited as the ‘‘Small Business 

17 Health Fairness Act of 2011’’. 

18 SEC. 621. RULES GOVERNING ASSOCIATION HEALTH 

19 PLANS. 

20 (a) IN GENERAL.—Subtitle B of title I of the Em21 ployee Retirement Income Security Act of 1974 is amend22 ed by adding after part 7 the following new part: 


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1 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

2 HEALTH PLANS 

3 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

4 ‘‘(a) IN GENERAL.—For purposes of this part, the 

5 term ‘association health plan’ means a group health plan 

6 whose sponsor is (or is deemed under this part to be) de7 scribed in subsection (b). 

8 ‘‘(b) SPONSORSHIP.—The sponsor of a group health 

9 plan is described in this subsection if such sponsor— 

10 ‘‘(1) is organized and maintained in good faith, 

11 with a constitution and bylaws specifically stating its 

12 purpose and providing for periodic meetings on at 

13 least an annual basis, as a bona fide trade associa14 tion, a bona fide industry association (including a 

15 rural electric cooperative association or a rural tele16 phone cooperative association), a bona fide profes17 sional association, or a bona fide chamber of com18 merce (or similar bona fide business association, in19 cluding a corporation or similar organization that 

20 operates on a cooperative basis (within the meaning 

21 of section 1381 of the Internal Revenue Code of 

22 1986)), for substantial purposes other than that of 

23 obtaining or providing medical care; 

24 ‘‘(2) is established as a permanent entity which 

25 receives the active support of its members and re26 quires for membership payment on a periodic basis 


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1 of dues or payments necessary to maintain eligibility 

2 for membership in the sponsor; and 

3 ‘‘(3) does not condition membership, such dues 

4 or payments, or coverage under the plan on the 

5 basis of health status-related factors with respect to 

6 the employees of its members (or affiliated mem7 bers), or the dependents of such employees, and does 

8 not condition such dues or payments on the basis of 

9 group health plan participation. 

10 Any sponsor consisting of an association of entities which 

11 meet the requirements of paragraphs (1), (2), and (3) 

12 shall be deemed to be a sponsor described in this sub13 section. 

14 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

15 PLANS. 

16 ‘‘(a) IN GENERAL.—The applicable authority shall 

17 prescribe by regulation a procedure under which, subject 

18 to subsection (b), the applicable authority shall certify as19 sociation health plans which apply for certification as 

20 meeting the requirements of this part. 

21 ‘‘(b) STANDARDS.—Under the procedure prescribed 

22 pursuant to subsection (a), in the case of an association 

23 health plan that provides at least one benefit option which 

24 does not consist of health insurance coverage, the applica25 ble authority shall certify such plan as meeting the reVerDate Mar 15 2010 23:44 Dec 22, 2011 Jkt 019200 PO 00000 Frm 00142 Fmt 6652 Sfmt 6201 E:\BILLS\H3682.IH H3682

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1 quirements of this part only if the applicable authority is 

2 satisfied that the applicable requirements of this part are 

3 met (or, upon the date on which the plan is to commence 

4 operations, will be met) with respect to the plan. 

5 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

6 PLANS.—An association health plan with respect to which 

7 certification under this part is in effect shall meet the ap8 plicable requirements of this part, effective on the date 

9 of certification (or, if later, on the date on which the plan 

10 is to commence operations). 

11 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI12 CATION.—The applicable authority may provide by regula13 tion for continued certification of association health plans 

14 under this part. 

15 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

16 PLANS.—The applicable authority shall establish a class 

17 certification procedure for association health plans under 

18 which all benefits consist of health insurance coverage. 

19 Under such procedure, the applicable authority shall pro20 vide for the granting of certification under this part to 

21 the plans in each class of such association health plans 

22 upon appropriate filing under such procedure in connec23 tion with plans in such class and payment of the pre24 scribed fee under section 807(a). 


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1 ‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION

2 HEALTH PLANS.—An association health plan which offers 

3 one or more benefit options which do not consist of health 

4 insurance coverage may be certified under this part only 

5 if such plan consists of any of the following: 

6 ‘‘(1) a plan which offered such coverage on the 

7 date of the enactment of the Small Business Health 

8 Fairness Act of 2011, 

9 ‘‘(2) a plan under which the sponsor does not 

10 restrict membership to one or more trades and busi11 nesses or industries and whose eligible participating 

12 employers represent a broad cross-section of trades 

13 and businesses or industries, or 

14 ‘‘(3) a plan whose eligible participating employ15 ers represent one or more trades or businesses, or 

16 one or more industries, consisting of any of the fol17 lowing: agriculture; equipment and automobile deal18 erships; barbering and cosmetology; certified public 

19 accounting practices; child care; construction; dance, 

20 theatrical and orchestra productions; disinfecting 

21 and pest control; financial services; fishing; food 

22 service establishments; hospitals; labor organiza23 tions; logging; manufacturing (metals); mining; med24 ical and dental practices; medical laboratories; pro25 fessional consulting services; sanitary services; transVerDate Mar 15 2010 23:44 Dec 22, 2011 Jkt 019200 PO 00000 Frm 00144 Fmt 6652 Sfmt 6201 E:\BILLS\H3682.IH H3682

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1 portation (local and freight); warehousing; whole2 saling/distributing; or any other trade or business or 

3 industry which has been indicated as having average 

4 or above-average risk or health claims experience by 

5 reason of State rate filings, denials of coverage, pro6 posed premium rate levels, or other means dem7 onstrated by such plan in accordance with regula8 tions. 

9 ‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND 

10 BOARDS OF TRUSTEES. 

11 ‘‘(a) SPONSOR.—The requirements of this subsection 

12 are met with respect to an association health plan if the 

13 sponsor has met (or is deemed under this part to have 

14 met) the requirements of section 801(b) for a continuous 

15 period of not less than 3 years ending with the date of 

16 the application for certification under this part. 

17 ‘‘(b) BOARD OF TRUSTEES.—The requirements of 

18 this subsection are met with respect to an association 

19 health plan if the following requirements are met: 

20 ‘‘(1) FISCAL CONTROL.—The plan is operated, 

21 pursuant to a trust agreement, by a board of trust22 ees which has complete fiscal control over the plan 

23 and which is responsible for all operations of the 

24 plan. 


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1 ‘‘(2) RULES OF OPERATION AND FINANCIAL

2 CONTROLS.—The board of trustees has in effect 

3 rules of operation and financial controls, based on a 

4 3-year plan of operation, adequate to carry out the 

5 terms of the plan and to meet all requirements of 

6 this title applicable to the plan. 

7 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

8 PARTICIPATING EMPLOYERS AND TO CONTRAC9 TORS.— 

10 ‘‘(A) BOARD MEMBERSHIP.— 

11 ‘‘(i) IN GENERAL.—Except as pro12 vided in clauses (ii) and (iii), the members 

13 of the board of trustees are individuals se14 lected from individuals who are the owners, 

15 officers, directors, or employees of the par16 ticipating employers or who are partners in 

17 the participating employers and actively 

18 participate in the business. 

19 ‘‘(ii) LIMITATION.— 

20 ‘‘(I) GENERAL RULE.—Except as 

21 provided in subclauses (II) and (III), 

22 no such member is an owner, officer, 

23 director, or employee of, or partner in, 

24 a contract administrator or other 

25 service provider to the plan. 


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1 ‘‘(II) LIMITED EXCEPTION FOR

2 PROVIDERS OF SERVICES SOLELY ON

3 BEHALF OF THE SPONSOR.—Officers 

4 or employees of a sponsor which is a 

5 service provider (other than a contract 

6 administrator) to the plan may be 

7 members of the board if they con8 stitute not more than 25 percent of 

9 the membership of the board and they 

10 do not provide services to the plan 

11 other than on behalf of the sponsor. 

12 ‘‘(III) TREATMENT OF PRO13 VIDERS OF MEDICAL CARE.—In the 

14 case of a sponsor which is an associa15 tion whose membership consists pri16 marily of providers of medical care, 

17 subclause (I) shall not apply in the 

18 case of any service provider described 

19 in subclause (I) who is a provider of 

20 medical care under the plan. 

21 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

22 Clause (i) shall not apply to an association 

23 health plan which is in existence on the 

24 date of the enactment of the Small Busi25 ness Health Fairness Act of 2011. 


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1 ‘‘(B) SOLE AUTHORITY.—The board has 

2 sole authority under the plan to approve appli3 cations for participation in the plan and to con4 tract with a service provider to administer the 

5 day-to-day affairs of the plan. 

6 ‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In 

7 the case of a group health plan which is established and 

8 maintained by a franchiser for a franchise network con9 sisting of its franchisees— 

10 ‘‘(1) the requirements of subsection (a) and sec11 tion 801(a) shall be deemed met if such require12 ments would otherwise be met if the franchiser were 

13 deemed to be the sponsor referred to in section 

14 801(b), such network were deemed to be an associa15 tion described in section 801(b), and each franchisee 

16 were deemed to be a member (of the association and 

17 the sponsor) referred to in section 801(b); and 

18 ‘‘(2) the requirements of section 804(a)(1) shall 

19 be deemed met. 

20 The Secretary may by regulation define for purposes of 

21 this subsection the terms ‘franchiser’, ‘franchise network’, 

22 and ‘franchisee’. 


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1 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE2 MENTS. 

3 ‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 

4 requirements of this subsection are met with respect to 

5 an association health plan if, under the terms of the 

6 plan— 

7 ‘‘(1) each participating employer must be— 

8 ‘‘(A) a member of the sponsor, 

9 ‘‘(B) the sponsor, or 

10 ‘‘(C) an affiliated member of the sponsor 

11 with respect to which the requirements of sub12 section (b) are met, 

13 except that, in the case of a sponsor which is a pro14 fessional association or other individual-based asso15 ciation, if at least one of the officers, directors, or 

16 employees of an employer, or at least one of the in17 dividuals who are partners in an employer and who 

18 actively participates in the business, is a member or 

19 such an affiliated member of the sponsor, partici20 pating employers may also include such employer; 

21 and 

22 ‘‘(2) all individuals commencing coverage under 

23 the plan after certification under this part must 

24 be— 

25 ‘‘(A) active or retired owners (including 

26 self-employed individuals), officers, directors, or 


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1 employees of, or partners in, participating em2 ployers; or 

3 ‘‘(B) the beneficiaries of individuals de4 scribed in subparagraph (A). 

5 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM6 PLOYEES.—In the case of an association health plan in 

7 existence on the date of the enactment of the Small Busi8 ness Health Fairness Act of 2011, an affiliated member 

9 of the sponsor of the plan may be offered coverage under 

10 the plan as a participating employer only if— 

11 ‘‘(1) the affiliated member was an affiliated 

12 member on the date of certification under this part; 

13 or 

14 ‘‘(2) during the 12-month period preceding the 

15 date of the offering of such coverage, the affiliated 

16 member has not maintained or contributed to a 

17 group health plan with respect to any of its employ18 ees who would otherwise be eligible to participate in 

19 such association health plan. 

20 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re21 quirements of this subsection are met with respect to an 

22 association health plan if, under the terms of the plan, 

23 no participating employer may provide health insurance 

24 coverage in the individual market for any employee not 

25 covered under the plan which is similar to the coverage 


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1 contemporaneously provided to employees of the employer 

2 under the plan, if such exclusion of the employee from cov3 erage under the plan is based on a health status-related 

4 factor with respect to the employee and such employee 

5 would, but for such exclusion on such basis, be eligible 

6 for coverage under the plan. 

7 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

8 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI9 PATE.—The requirements of this subsection are met with 

10 respect to an association health plan if— 

11 ‘‘(1) under the terms of the plan, all employers 

12 meeting the preceding requirements of this section 

13 are eligible to qualify as participating employers for 

14 all geographically available coverage options, unless, 

15 in the case of any such employer, participation or 

16 contribution requirements of the type referred to in 

17 section 2711 of the Public Health Service Act are 

18 not met; 

19 ‘‘(2) upon request, any employer eligible to par20 ticipate is furnished information regarding all cov21 erage options available under the plan; and 

22 ‘‘(3) the applicable requirements of sections 

23 701, 702, and 703 are met with respect to the plan. 


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1 ‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN 

2 DOCUMENTS, CONTRIBUTION RATES, AND 

3 BENEFIT OPTIONS. 

4 ‘‘(a) IN GENERAL.—The requirements of this section 

5 are met with respect to an association health plan if the 

6 following requirements are met: 

7 ‘‘(1) CONTENTS OF GOVERNING INSTRU8 MENTS.—The instruments governing the plan in9 clude a written instrument, meeting the require10 ments of an instrument required under section 

11 402(a)(1), which— 

12 ‘‘(A) provides that the board of trustees 

13 serves as the named fiduciary required for plans 

14 under section 402(a)(1) and serves in the ca15 pacity of a plan administrator (referred to in 

16 section 3(16)(A)); 

17 ‘‘(B) provides that the sponsor of the plan 

18 is to serve as plan sponsor (referred to in sec19 tion 3(16)(B)); and 

20 ‘‘(C) incorporates the requirements of sec21 tion 806. 

22 ‘‘(2) CONTRIBUTION RATES MUST BE NON23 DISCRIMINATORY.— 

24 ‘‘(A) The contribution rates for any par25 ticipating small employer do not vary on the 

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1 tion to employees of such employer or their 

2 beneficiaries and do not vary on the basis of the 

3 type of business or industry in which such em4 ployer is engaged. 

5 ‘‘(B) Nothing in this title or any other pro6 vision of law shall be construed to preclude an 

7 association health plan, or a health insurance 

8 issuer offering health insurance coverage in 

9 connection with an association health plan, 

10 from— 

11 ‘‘(i) setting contribution rates based 

12 on the claims experience of the plan; or 

13 ‘‘(ii) varying contribution rates for 

14 small employers in a State to the extent 

15 that such rates could vary using the same 

16 methodology employed in such State for 

17 regulating premium rates in the small 

18 group market with respect to health insur19 ance coverage offered in connection with 

20 bona fide associations (within the meaning 

21 of section 2791(d)(3) of the Public Health 

22 Service Act), 

23 subject to the requirements of section 702(b) 

24 relating to contribution rates. 


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1 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI2 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If 

3 any benefit option under the plan does not consist 

4 of health insurance coverage, the plan has as of the 

5 beginning of the plan year not fewer than 1,000 par6 ticipants and beneficiaries. 

7 ‘‘(4) MARKETING REQUIREMENTS.— 

8 ‘‘(A) IN GENERAL.—If a benefit option 

9 which consists of health insurance coverage is 

10 offered under the plan, State-licensed insurance 

11 agents shall be used to distribute to small em12 ployers coverage which does not consist of 

13 health insurance coverage in a manner com14 parable to the manner in which such agents are 

15 used to distribute health insurance coverage. 

16 ‘‘(B) STATE-LICENSED INSURANCE

17 AGENTS.—For purposes of subparagraph (A), 

18 the term ‘State-licensed insurance agents’ 

19 means one or more agents who are licensed in 

20 a State and are subject to the laws of such 

21 State relating to licensure, qualification, test22 ing, examination, and continuing education of 

23 persons authorized to offer, sell, or solicit 

24 health insurance coverage in such State. 


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1 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

2 other requirements as the applicable authority deter3 mines are necessary to carry out the purposes of this 

4 part, which shall be prescribed by the applicable au5 thority by regulation. 

6 ‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO

7 DESIGN BENEFIT OPTIONS.—Subject to section 514(d), 

8 nothing in this part or any provision of State law (as de9 fined in section 514(c)(1)) shall be construed to preclude 

10 an association health plan, or a health insurance issuer 

11 offering health insurance coverage in connection with an 

12 association health plan, from exercising its sole discretion 

13 in selecting the specific items and services consisting of 

14 medical care to be included as benefits under such plan 

15 or coverage, except (subject to section 514) in the case 

16 of (1) any law to the extent that it is not preempted under 

17 section 731(a)(1) with respect to matters governed by sec18 tion 711, 712, or 713, or (2) any law of the State with 

19 which filing and approval of a policy type offered by the 

20 plan was initially obtained to the extent that such law pro21 hibits an exclusion of a specific disease from such cov22 erage. 


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1 ‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 

2 FOR SOLVENCY FOR PLANS PROVIDING 

3 HEALTH BENEFITS IN ADDITION TO HEALTH 

4 INSURANCE COVERAGE. 

5 ‘‘(a) IN GENERAL.—The requirements of this section 

6 are met with respect to an association health plan if— 

7 ‘‘(1) the benefits under the plan consist solely 

8 of health insurance coverage; or 

9 ‘‘(2) if the plan provides any additional benefit 

10 options which do not consist of health insurance cov11 erage, the plan— 

12 ‘‘(A) establishes and maintains reserves 

13 with respect to such additional benefit options, 

14 in amounts recommended by the qualified actu15 ary, consisting of— 

16 ‘‘(i) a reserve sufficient for unearned 

17 contributions; 

18 ‘‘(ii) a reserve sufficient for benefit li19 abilities which have been incurred, which 

20 have not been satisfied, and for which risk 

21 of loss has not yet been transferred, and 

22 for expected administrative costs with re23 spect to such benefit liabilities; 

24 ‘‘(iii) a reserve sufficient for any other 

25 obligations of the plan; and 


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1 ‘‘(iv) a reserve sufficient for a margin 

2 of error and other fluctuations, taking into 

3 account the specific circumstances of the 

4 plan; and 

5 ‘‘(B) establishes and maintains aggregate 

6 and specific excess/stop loss insurance and sol7 vency indemnification, with respect to such ad8 ditional benefit options for which risk of loss 

9 has not yet been transferred, as follows: 

10 ‘‘(i) The plan shall secure aggregate 

11 excess/stop loss insurance for the plan with 

12 an attachment point which is not greater 

13 than 125 percent of expected gross annual 

14 claims. The applicable authority may by 

15 regulation provide for upward adjustments 

16 in the amount of such percentage in speci17 fied circumstances in which the plan spe18 cifically provides for and maintains re19 serves in excess of the amounts required 

20 under subparagraph (A). 

21 ‘‘(ii) The plan shall secure specific ex22 cess/stop loss insurance for the plan with 

23 an attachment point which is at least equal 

24 to an amount recommended by the plan’s 

25 qualified actuary. The applicable authority 


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1 may by regulation provide for adjustments 

2 in the amount of such insurance in speci3 fied circumstances in which the plan spe4 cifically provides for and maintains re5 serves in excess of the amounts required 

6 under subparagraph (A). 

7 ‘‘(iii) The plan shall secure indem8 nification insurance for any claims which 

9 the plan is unable to satisfy by reason of 

10 a plan termination. 

11 Any person issuing to a plan insurance described in clause 

12 (i), (ii), or (iii) of subparagraph (B) shall notify the Sec13 retary of any failure of premium payment meriting can14 cellation of the policy prior to undertaking such a cancella15 tion. Any regulations prescribed by the applicable author16 ity pursuant to clause (i) or (ii) of subparagraph (B) may 

17 allow for such adjustments in the required levels of excess/ 

18 stop loss insurance as the qualified actuary may rec19 ommend, taking into account the specific circumstances 

20 of the plan. 

21 ‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS

22 RESERVES.—In the case of any association health plan de23 scribed in subsection (a)(2), the requirements of this sub24 section are met if the plan establishes and maintains sur25 plus in an amount at least equal to— 


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1 ‘‘(1) $500,000, or 

2 ‘‘(2) such greater amount (but not greater than 

3 $2,000,000) as may be set forth in regulations pre4 scribed by the applicable authority, considering the 

5 level of aggregate and specific excess/stop loss insur6 ance provided with respect to such plan and other 

7 factors related to solvency risk, such as the plan’s 

8 projected levels of participation or claims, the nature 

9 of the plan’s liabilities, and the types of assets avail10 able to assure that such liabilities are met. 

11 ‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of 

12 any association health plan described in subsection (a)(2), 

13 the applicable authority may provide such additional re14 quirements relating to reserves, excess/stop loss insurance, 

15 and indemnification insurance as the applicable authority 

16 considers appropriate. Such requirements may be provided 

17 by regulation with respect to any such plan or any class 

18 of such plans. 

19 ‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR20 ANCE.—The applicable authority may provide for adjust21 ments to the levels of reserves otherwise required under 

22 subsections (a) and (b) with respect to any plan or class 

23 of plans to take into account excess/stop loss insurance 

24 provided with respect to such plan or plans. 


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1 ‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The 

2 applicable authority may permit an association health plan 

3 described in subsection (a)(2) to substitute, for all or part 

4 of the requirements of this section (except subsection 

5 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar6 rangement, or other financial arrangement as the applica7 ble authority determines to be adequate to enable the plan 

8 to fully meet all its financial obligations on a timely basis 

9 and is otherwise no less protective of the interests of par10 ticipants and beneficiaries than the requirements for 

11 which it is substituted. The applicable authority may take 

12 into account, for purposes of this subsection, evidence pro13 vided by the plan or sponsor which demonstrates an as14 sumption of liability with respect to the plan. Such evi15 dence may be in the form of a contract of indemnification, 

16 lien, bonding, insurance, letter of credit, recourse under 

17 applicable terms of the plan in the form of assessments 

18 of participating employers, security, or other financial ar19 rangement. 

20 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

21 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 

22 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO23 CIATION HEALTH PLAN FUND.— 

24 ‘‘(A) IN GENERAL.—In the case of an as25 sociation health plan described in subsection 


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1 (a)(2), the requirements of this subsection are 

2 met if the plan makes payments into the Asso3 ciation Health Plan Fund under this subpara4 graph when they are due. Such payments shall 

5 consist of annual payments in the amount of 

6 $5,000, and, in addition to such annual pay7 ments, such supplemental payments as the Sec8 retary may determine to be necessary under 

9 paragraph (2). Payments under this paragraph 

10 are payable to the Fund at the time determined 

11 by the Secretary. Initial payments are due in 

12 advance of certification under this part. Pay13 ments shall continue to accrue until a plan’s as14 sets are distributed pursuant to a termination 

15 procedure. 

16 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

17 PAYMENTS.—If any payment is not made by a 

18 plan when it is due, a late payment charge of 

19 not more than 100 percent of the payment 

20 which was not timely paid shall be payable by 

21 the plan to the Fund. 

22 ‘‘(C) CONTINUED DUTY OF THE SEC23 RETARY.—The Secretary shall not cease to 

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1 count of the failure of a plan to pay any pay2 ment when due. 

3 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

4 EXCESS/STOP LOSS INSURANCE COVERAGE AND IN5 DEMNIFICATION INSURANCE COVERAGE FOR CER6 TAIN PLANS.—In any case in which the applicable 

7 authority determines that there is, or that there is 

8 reason to believe that there will be: (A) a failure to 

9 take necessary corrective actions under section 

10 809(a) with respect to an association health plan de11 scribed in subsection (a)(2); or (B) a termination of 

12 such a plan under section 809(b) or 810(b)(8) (and, 

13 if the applicable authority is not the Secretary, cer14 tifies such determination to the Secretary), the Sec15 retary shall determine the amounts necessary to 

16 make payments to an insurer (designated by the 

17 Secretary) to maintain in force excess/stop loss in18 surance coverage or indemnification insurance cov19 erage for such plan, if the Secretary determines that 

20 there is a reasonable expectation that, without such 

21 payments, claims would not be satisfied by reason of 

22 termination of such coverage. The Secretary shall, to 

23 the extent provided in advance in appropriation 

24 Acts, pay such amounts so determined to the insurer 

25 designated by the Secretary. 


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1 ‘‘(3) ASSOCIATION HEALTH PLAN FUND.— 

2 ‘‘(A) IN GENERAL.—There is established 

3 on the books of the Treasury a fund to be 

4 known as the ‘Association Health Plan Fund’. 

5 The Fund shall be available for making pay6 ments pursuant to paragraph (2). The Fund 

7 shall be credited with payments received pursu8 ant to paragraph (1)(A), penalties received pur9 suant to paragraph (1)(B); and earnings on in10 vestments of amounts of the Fund under sub11 paragraph (B). 

12 ‘‘(B) INVESTMENT.—Whenever the Sec13 retary determines that the moneys of the fund 

14 are in excess of current needs, the Secretary 

15 may request the investment of such amounts as 

16 the Secretary determines advisable by the Sec17 retary of the Treasury in obligations issued or 

18 guaranteed by the United States. 

19 ‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes 

20 of this section— 

21 ‘‘(1) AGGREGATE EXCESS/STOP LOSS INSUR22 ANCE.—The term ‘aggregate excess/stop loss insur23 ance’ means, in connection with an association 

24 health plan, a contract— 


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1 ‘‘(A) under which an insurer (meeting such 

2 minimum standards as the applicable authority 

3 may prescribe by regulation) provides for pay4 ment to the plan with respect to aggregate 

5 claims under the plan in excess of an amount 

6 or amounts specified in such contract; 

7 ‘‘(B) which is guaranteed renewable; and 

8 ‘‘(C) which allows for payment of pre9 miums by any third party on behalf of the in10 sured plan. 

11 ‘‘(2) SPECIFIC EXCESS/STOP LOSS INSUR12 ANCE.—The term ‘specific excess/stop loss insur13 ance’ means, in connection with an association 

14 health plan, a contract— 

15 ‘‘(A) under which an insurer (meeting such 

16 minimum standards as the applicable authority 

17 may prescribe by regulation) provides for pay18 ment to the plan with respect to claims under 

19 the plan in connection with a covered individual 

20 in excess of an amount or amounts specified in 

21 such contract in connection with such covered 

22 individual; 

23 ‘‘(B) which is guaranteed renewable; and 


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1 ‘‘(C) which allows for payment of pre2 miums by any third party on behalf of the in3 sured plan. 

4 ‘‘(h) INDEMNIFICATION INSURANCE.—For purposes 

5 of this section, the term ‘indemnification insurance’ 

6 means, in connection with an association health plan, a 

7 contract— 

8 ‘‘(1) under which an insurer (meeting such min9 imum standards as the applicable authority may pre10 scribe by regulation) provides for payment to the 

11 plan with respect to claims under the plan which the 

12 plan is unable to satisfy by reason of a termination 

13 pursuant to section 809(b) (relating to mandatory 

14 termination); 

15 ‘‘(2) which is guaranteed renewable and 

16 noncancellable for any reason (except as the applica17 ble authority may prescribe by regulation); and 

18 ‘‘(3) which allows for payment of premiums by 

19 any third party on behalf of the insured plan. 

20 ‘‘(i) RESERVES.—For purposes of this section, the 

21 term ‘reserves’ means, in connection with an association 

22 health plan, plan assets which meet the fiduciary stand23 ards under part 4 and such additional requirements re24 garding liquidity as the applicable authority may prescribe 

25 by regulation. 


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1 ‘‘(j) SOLVENCY STANDARDS WORKING GROUP.— 

2 ‘‘(1) IN GENERAL.—Within 90 days after the 

3 date of the enactment of the Small Business Health 

4 Fairness Act of 2011, the applicable authority shall 

5 establish a Solvency Standards Working Group. In 

6 prescribing the initial regulations under this section, 

7 the applicable authority shall take into account the 

8 recommendations of such Working Group. 

9 ‘‘(2) MEMBERSHIP.—The Working Group shall 

10 consist of not more than 15 members appointed by 

11 the applicable authority. The applicable authority 

12 shall include among persons invited to membership 

13 on the Working Group at least one of each of the 

14 following: 

15 ‘‘(A) a representative of the National Asso16 ciation of Insurance Commissioners; 

17 ‘‘(B) a representative of the American 

18 Academy of Actuaries; 

19 ‘‘(C) a representative of the State govern20 ments, or their interests; 

21 ‘‘(D) a representative of existing self-in22 sured arrangements, or their interests; 

23 ‘‘(E) a representative of associations of the 

24 type referred to in section 801(b)(1), or their 

25 interests; and 


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1 ‘‘(F) a representative of multiemployer 

2 plans that are group health plans, or their in3 terests. 

4 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE5 LATED REQUIREMENTS. 

6 ‘‘(a) FILING FEE.—Under the procedure prescribed 

7 pursuant to section 802(a), an association health plan 

8 shall pay to the applicable authority at the time of filing 

9 an application for certification under this part a filing fee 

10 in the amount of $5,000, which shall be available in the 

11 case of the Secretary, to the extent provided in appropria12 tion Acts, for the sole purpose of administering the certifi13 cation procedures applicable with respect to association 

14 health plans. 

15 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA16 TION FOR CERTIFICATION.—An application for certifi17 cation under this part meets the requirements of this sec18 tion only if it includes, in a manner and form which shall 

19 be prescribed by the applicable authority by regulation, at 

20 least the following information: 

21 ‘‘(1) IDENTIFYING INFORMATION.—The names 

22 and addresses of— 

23 ‘‘(A) the sponsor; and 

24 ‘‘(B) the members of the board of trustees 

25 of the plan. 


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1 ‘‘(2) STATES IN WHICH PLAN INTENDS TO DO

2 BUSINESS.—The States in which participants and 

3 beneficiaries under the plan are to be located and 

4 the number of them expected to be located in each 

5 such State. 

6 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro7 vided by the board of trustees that the bonding re8 quirements of section 412 will be met as of the date 

9 of the application or (if later) commencement of op10 erations. 

11 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu12 ments governing the plan (including any bylaws and 

13 trust agreements), the summary plan description, 

14 and other material describing the benefits that will 

15 be provided to participants and beneficiaries under 

16 the plan. 

17 ‘‘(5) AGREEMENTS WITH SERVICE PRO18 VIDERS.—A copy of any agreements between the 

19 plan and contract administrators and other service 

20 providers. 

21 ‘‘(6) FUNDING REPORT.—In the case of asso22 ciation health plans providing benefits options in ad23 dition to health insurance coverage, a report setting 

24 forth information with respect to such additional 

25 benefit options determined as of a date within the 


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1 120-day period ending with the date of the applica2 tion, including the following: 

3 ‘‘(A) RESERVES.—A statement, certified 

4 by the board of trustees of the plan, and a 

5 statement of actuarial opinion, signed by a 

6 qualified actuary, that all applicable require7 ments of section 806 are or will be met in ac8 cordance with regulations which the applicable 

9 authority shall prescribe. 

10 ‘‘(B) ADEQUACY OF CONTRIBUTION

11 RATES.—A statement of actuarial opinion, 

12 signed by a qualified actuary, which sets forth 

13 a description of the extent to which contribution 

14 rates are adequate to provide for the payment 

15 of all obligations and the maintenance of re16 quired reserves under the plan for the 12- 

17 month period beginning with such date within 

18 such 120-day period, taking into account the 

19 expected coverage and experience of the plan. If 

20 the contribution rates are not fully adequate, 

21 the statement of actuarial opinion shall indicate 

22 the extent to which the rates are inadequate 

23 and the changes needed to ensure adequacy. 

24 ‘‘(C) CURRENT AND PROJECTED VALUE OF

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1 tuarial opinion signed by a qualified actuary, 

2 which sets forth the current value of the assets 

3 and liabilities accumulated under the plan and 

4 a projection of the assets, liabilities, income, 

5 and expenses of the plan for the 12-month pe6 riod referred to in subparagraph (B). The in7 come statement shall identify separately the 

8 plan’s administrative expenses and claims. 

9 ‘‘(D) COSTS OF COVERAGE TO BE

10 CHARGED AND OTHER EXPENSES.—A state11 ment of the costs of coverage to be charged, in12 cluding an itemization of amounts for adminis13 tration, reserves, and other expenses associated 

14 with the operation of the plan. 

15 ‘‘(E) OTHER INFORMATION.—Any other 

16 information as may be determined by the appli17 cable authority, by regulation, as necessary to 

18 carry out the purposes of this part. 

19 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

20 STATES.—A certification granted under this part to an 

21 association health plan shall not be effective unless written 

22 notice of such certification is filed with the applicable 

23 State authority of each State in which at least 25 percent 

24 of the participants and beneficiaries under the plan are 

25 located. For purposes of this subsection, an individual 


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1 shall be considered to be located in the State in which a 

2 known address of such individual is located or in which 

3 such individual is employed. 

4 ‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case 

5 of any association health plan certified under this part, 

6 descriptions of material changes in any information which 

7 was required to be submitted with the application for the 

8 certification under this part shall be filed in such form 

9 and manner as shall be prescribed by the applicable au10 thority by regulation. The applicable authority may re11 quire by regulation prior notice of material changes with 

12 respect to specified matters which might serve as the basis 

13 for suspension or revocation of the certification. 

14 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS15 SOCIATION HEALTH PLANS.—An association health plan 

16 certified under this part which provides benefit options in 

17 addition to health insurance coverage for such plan year 

18 shall meet the requirements of section 103 by filing an 

19 annual report under such section which shall include infor20 mation described in subsection (b)(6) with respect to the 

21 plan year and, notwithstanding section 104(a)(1)(A), shall 

22 be filed with the applicable authority not later than 90 

23 days after the close of the plan year (or on such later date 

24 as may be prescribed by the applicable authority). The apVerDate Mar 15 2010 23:44 Dec 22, 2011 Jkt 019200 PO 00000 Frm 00171 Fmt 6652 Sfmt 6201 E:\BILLS\H3682.IH H3682

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1 plicable authority may require by regulation such interim 

2 reports as it considers appropriate. 

3 ‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The 

4 board of trustees of each association health plan which 

5 provides benefits options in addition to health insurance 

6 coverage and which is applying for certification under this 

7 part or is certified under this part shall engage, on behalf 

8 of all participants and beneficiaries, a qualified actuary 

9 who shall be responsible for the preparation of the mate10 rials comprising information necessary to be submitted by 

11 a qualified actuary under this part. The qualified actuary 

12 shall utilize such assumptions and techniques as are nec13 essary to enable such actuary to form an opinion as to 

14 whether the contents of the matters reported under this 

15 part— 

16 ‘‘(1) are in the aggregate reasonably related to 

17 the experience of the plan and to reasonable expecta18 tions; and 

19 ‘‘(2) represent such actuary’s best estimate of 

20 anticipated experience under the plan. 

21 The opinion by the qualified actuary shall be made with 

22 respect to, and shall be made a part of, the annual report. 


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1 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER2 MINATION. 

3 ‘‘Except as provided in section 809(b), an association 

4 health plan which is or has been certified under this part 

5 may terminate (upon or at any time after cessation of ac6 cruals in benefit liabilities) only if the board of trustees, 

7 not less than 60 days before the proposed termination 

8 date— 

9 ‘‘(1) provides to the participants and bene10 ficiaries a written notice of intent to terminate stat11 ing that such termination is intended and the pro12 posed termination date; 

13 ‘‘(2) develops a plan for winding up the affairs 

14 of the plan in connection with such termination in 

15 a manner which will result in timely payment of all 

16 benefits for which the plan is obligated; and 

17 ‘‘(3) submits such plan in writing to the appli18 cable authority. 

19 Actions required under this section shall be taken in such 

20 form and manner as may be prescribed by the applicable 

21 authority by regulation. 

22 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI23 NATION. 

24 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE25 SERVES.—An association health plan which is certified 

26 under this part and which provides benefits other than 


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1 health insurance coverage shall continue to meet the re2 quirements of section 806, irrespective of whether such 

3 certification continues in effect. The board of trustees of 

4 such plan shall determine quarterly whether the require5 ments of section 806 are met. In any case in which the 

6 board determines that there is reason to believe that there 

7 is or will be a failure to meet such requirements, or the 

8 applicable authority makes such a determination and so 

9 notifies the board, the board shall immediately notify the 

10 qualified actuary engaged by the plan, and such actuary 

11 shall, not later than the end of the next following month, 

12 make such recommendations to the board for corrective 

13 action as the actuary determines necessary to ensure com14 pliance with section 806. Not later than 30 days after re15 ceiving from the actuary recommendations for corrective 

16 actions, the board shall notify the applicable authority (in 

17 such form and manner as the applicable authority may 

18 prescribe by regulation) of such recommendations of the 

19 actuary for corrective action, together with a description 

20 of the actions (if any) that the board has taken or plans 

21 to take in response to such recommendations. The board 

22 shall thereafter report to the applicable authority, in such 

23 form and frequency as the applicable authority may speci24 fy to the board, regarding corrective action taken by the 

25 board until the requirements of section 806 are met. 


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1 ‘‘(b) MANDATORY TERMINATION.—In any case in 

2 which— 

3 ‘‘(1) the applicable authority has been notified 

4 under subsection (a) (or by an issuer of excess/stop 

5 loss insurance or indemnity insurance pursuant to 

6 section 806(a)) of a failure of an association health 

7 plan which is or has been certified under this part 

8 and is described in section 806(a)(2) to meet the re9 quirements of section 806 and has not been notified 

10 by the board of trustees of the plan that corrective 

11 action has restored compliance with such require12 ments; and 

13 ‘‘(2) the applicable authority determines that 

14 there is a reasonable expectation that the plan will 

15 continue to fail to meet the requirements of section 

16 806, 

17 the board of trustees of the plan shall, at the direction 

18 of the applicable authority, terminate the plan and, in the 

19 course of the termination, take such actions as the appli20 cable authority may require, including satisfying any 

21 claims referred to in section 806(a)(2)(B)(iii) and recov22 ering for the plan any liability under subsection 

23 (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 

24 that the affairs of the plan will be, to the maximum extent 


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1 possible, wound up in a manner which will result in timely 

2 provision of all benefits for which the plan is obligated. 

3 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL4 VENT ASSOCIATION HEALTH PLANS PRO5 VIDING HEALTH BENEFITS IN ADDITION TO 

6 HEALTH INSURANCE COVERAGE. 

7 ‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR

8 INSOLVENT PLANS.—Whenever the Secretary determines 

9 that an association health plan which is or has been cer10 tified under this part and which is described in section 

11 806(a)(2) will be unable to provide benefits when due or 

12 is otherwise in a financially hazardous condition, as shall 

13 be defined by the Secretary by regulation, the Secretary 

14 shall, upon notice to the plan, apply to the appropriate 

15 United States district court for appointment of the Sec16 retary as trustee to administer the plan for the duration 

17 of the insolvency. The plan may appear as a party and 

18 other interested persons may intervene in the proceedings 

19 at the discretion of the court. The court shall appoint such 

20 Secretary trustee if the court determines that the trustee21 ship is necessary to protect the interests of the partici22 pants and beneficiaries or providers of medical care or to 

23 avoid any unreasonable deterioration of the financial con24 dition of the plan. The trusteeship of such Secretary shall 

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1 tence of this subsection are remedied or the plan is termi2 nated. 

3 ‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon 

4 appointment as trustee under subsection (a), shall have 

5 the power— 

6 ‘‘(1) to do any act authorized by the plan, this 

7 title, or other applicable provisions of law to be done 

8 by the plan administrator or any trustee of the plan; 

9 ‘‘(2) to require the transfer of all (or any part) 

10 of the assets and records of the plan to the Sec11 retary as trustee; 

12 ‘‘(3) to invest any assets of the plan which the 

13 Secretary holds in accordance with the provisions of 

14 the plan, regulations prescribed by the Secretary, 

15 and applicable provisions of law; 

16 ‘‘(4) to require the sponsor, the plan adminis17 trator, any participating employer, and any employee 

18 organization representing plan participants to fur19 nish any information with respect to the plan which 

20 the Secretary as trustee may reasonably need in 

21 order to administer the plan; 

22 ‘‘(5) to collect for the plan any amounts due the 

23 plan and to recover reasonable expenses of the trust24 eeship; 


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1 ‘‘(6) to commence, prosecute, or defend on be2 half of the plan any suit or proceeding involving the 

3 plan; 

4 ‘‘(7) to issue, publish, or file such notices, state5 ments, and reports as may be required by the Sec6 retary by regulation or required by any order of the 

7 court; 

8 ‘‘(8) to terminate the plan (or provide for its 

9 termination in accordance with section 809(b)) and 

10 liquidate the plan assets, to restore the plan to the 

11 responsibility of the sponsor, or to continue the 

12 trusteeship; 

13 ‘‘(9) to provide for the enrollment of plan par14 ticipants and beneficiaries under appropriate cov15 erage options; and 

16 ‘‘(10) to do such other acts as may be nec17 essary to comply with this title or any order of the 

18 court and to protect the interests of plan partici19 pants and beneficiaries and providers of medical 

20 care. 

21 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac22 ticable after the Secretary’s appointment as trustee, the 

23 Secretary shall give notice of such appointment to— 

24 ‘‘(1) the sponsor and plan administrator; 

25 ‘‘(2) each participant; 


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1 ‘‘(3) each participating employer; and 

2 ‘‘(4) if applicable, each employee organization 

3 which, for purposes of collective bargaining, rep4 resents plan participants. 

5 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in6 consistent with the provisions of this title, or as may be 

7 otherwise ordered by the court, the Secretary, upon ap8 pointment as trustee under this section, shall be subject 

9 to the same duties as those of a trustee under section 704 

10 of title 11, United States Code, and shall have the duties 

11 of a fiduciary for purposes of this title. 

12 ‘‘(e) OTHER PROCEEDINGS.—An application by the 

13 Secretary under this subsection may be filed notwith14 standing the pendency in the same or any other court of 

15 any bankruptcy, mortgage foreclosure, or equity receiver16 ship proceeding, or any proceeding to reorganize, conserve, 

17 or liquidate such plan or its property, or any proceeding 

18 to enforce a lien against property of the plan. 

19 ‘‘(f) JURISDICTION OF COURT.— 

20 ‘‘(1) IN GENERAL.—Upon the filing of an appli21 cation for the appointment as trustee or the issuance 

22 of a decree under this section, the court to which the 

23 application is made shall have exclusive jurisdiction 

24 of the plan involved and its property wherever lo25 cated with the powers, to the extent consistent with 


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1 the purposes of this section, of a court of the United 

2 States having jurisdiction over cases under chapter 

3 11 of title 11, United States Code. Pending an adju4 dication under this section such court shall stay, and 

5 upon appointment by it of the Secretary as trustee, 

6 such court shall continue the stay of, any pending 

7 mortgage foreclosure, equity receivership, or other 

8 proceeding to reorganize, conserve, or liquidate the 

9 plan, the sponsor, or property of such plan or spon10 sor, and any other suit against any receiver, conser11 vator, or trustee of the plan, the sponsor, or prop12 erty of the plan or sponsor. Pending such adjudica13 tion and upon the appointment by it of the Sec14 retary as trustee, the court may stay any proceeding 

15 to enforce a lien against property of the plan or the 

16 sponsor or any other suit against the plan or the 

17 sponsor. 

18 ‘‘(2) VENUE.—An action under this section 

19 may be brought in the judicial district where the 

20 sponsor or the plan administrator resides or does 

21 business or where any asset of the plan is situated. 

22 A district court in which such action is brought may 

23 issue process with respect to such action in any 

24 other judicial district. 


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1 ‘‘(g) PERSONNEL.—In accordance with regulations 

2 which shall be prescribed by the Secretary, the Secretary 

3 shall appoint, retain, and compensate accountants, actu4 aries, and other professional service personnel as may be 

5 necessary in connection with the Secretary’s service as 

6 trustee under this section. 

7 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

8 ‘‘(a) IN GENERAL.—Notwithstanding section 514, a 

9 State may impose by law a contribution tax on an associa10 tion health plan described in section 806(a)(2), if the plan 

11 commenced operations in such State after the date of the 

12 enactment of the Small Business Health Fairness Act of 

13 2011. 

14 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec15 tion, the term ‘contribution tax’ imposed by a State on 

16 an association health plan means any tax imposed by such 

17 State if— 

18 ‘‘(1) such tax is computed by applying a rate to 

19 the amount of premiums or contributions, with re20 spect to individuals covered under the plan who are 

21 residents of such State, which are received by the 

22 plan from participating employers located in such 

23 State or from such individuals; 

24 ‘‘(2) the rate of such tax does not exceed the 

25 rate of any tax imposed by such State on premiums 


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1 or contributions received by insurers or health main2 tenance organizations for health insurance coverage 

3 offered in such State in connection with a group 

4 health plan; 

5 ‘‘(3) such tax is otherwise nondiscriminatory; 

6 and 

7 ‘‘(4) the amount of any such tax assessed on 

8 the plan is reduced by the amount of any tax or as9 sessment otherwise imposed by the State on pre10 miums, contributions, or both received by insurers or 

11 health maintenance organizations for health insur12 ance coverage, aggregate excess/stop loss insurance 

13 (as defined in section 806(g)(1)), specific excess/stop 

14 loss insurance (as defined in section 806(g)(2)), 

15 other insurance related to the provision of medical 

16 care under the plan, or any combination thereof pro17 vided by such insurers or health maintenance organi18 zations in such State in connection with such plan. 

19 ‘‘SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION. 

20 ‘‘(a) DEFINITIONS.—For purposes of this part— 

21 ‘‘(1) GROUP HEALTH PLAN.—The term ‘group 

22 health plan’ has the meaning provided in section 

23 733(a)(1) (after applying subsection (b) of this sec24 tion). 


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1 ‘‘(2) MEDICAL CARE.—The term ‘medical care’ 

2 has the meaning provided in section 733(a)(2). 

3 ‘‘(3) HEALTH INSURANCE COVERAGE.—The 

4 term ‘health insurance coverage’ has the meaning 

5 provided in section 733(b)(1). 

6 ‘‘(4) HEALTH INSURANCE ISSUER.—The term 

7 ‘health insurance issuer’ has the meaning provided 

8 in section 733(b)(2). 

9 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap10 plicable authority’ means the Secretary, except that, 

11 in connection with any exercise of the Secretary’s 

12 authority regarding which the Secretary is required 

13 under section 506(d) to consult with a State, such 

14 term means the Secretary, in consultation with such 

15 State. 

16 ‘‘(6) HEALTH STATUS-RELATED FACTOR.—The 

17 term ‘health status-related factor’ has the meaning 

18 provided in section 733(d)(2). 

19 ‘‘(7) INDIVIDUAL MARKET.— 

20 ‘‘(A) IN GENERAL.—The term ‘individual 

21 market’ means the market for health insurance 

22 coverage offered to individuals other than in 

23 connection with a group health plan. 

24 ‘‘(B) TREATMENT OF VERY SMALL

25 GROUPS.— 


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1 ‘‘(i) IN GENERAL.—Subject to clause 

2 (ii), such term includes coverage offered in 

3 connection with a group health plan that 

4 has fewer than 2 participants as current 

5 employees or participants described in sec6 tion 732(d)(3) on the first day of the plan 

7 year. 

8 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

9 shall not apply in the case of health insur10 ance coverage offered in a State if such 

11 State regulates the coverage described in 

12 such clause in the same manner and to the 

13 same extent as coverage in the small group 

14 market (as defined in section 2791(e)(5) of 

15 the Public Health Service Act) is regulated 

16 by such State. 

17 ‘‘(8) PARTICIPATING EMPLOYER.—The term 

18 ‘participating employer’ means, in connection with 

19 an association health plan, any employer, if any indi20 vidual who is an employee of such employer, a part21 ner in such employer, or a self-employed individual 

22 who is such employer (or any dependent, as defined 

23 under the terms of the plan, of such individual) is 

24 or was covered under such plan in connection with 

25 the status of such individual as such an employee, 


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1 partner, or self-employed individual in relation to the 

2 plan. 

3 ‘‘(9) APPLICABLE STATE AUTHORITY.—The 

4 term ‘applicable State authority’ means, with respect 

5 to a health insurance issuer in a State, the State in6 surance commissioner or official or officials des7 ignated by the State to enforce the requirements of 

8 title XXVII of the Public Health Service Act for the 

9 State involved with respect to such issuer. 

10 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali11 fied actuary’ means an individual who is a member 

12 of the American Academy of Actuaries. 

13 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili14 ated member’ means, in connection with a sponsor— 

15 ‘‘(A) a person who is otherwise eligible to 

16 be a member of the sponsor but who elects an 

17 affiliated status with the sponsor, 

18 ‘‘(B) in the case of a sponsor with mem19 bers which consist of associations, a person who 

20 is a member of any such association and elects 

21 an affiliated status with the sponsor, or 

22 ‘‘(C) in the case of an association health 

23 plan in existence on the date of the enactment 

24 of the Small Business Health Fairness Act of 


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1 2011, a person eligible to be a member of the 

2 sponsor or one of its member associations. 

3 ‘‘(12) LARGE EMPLOYER.—The term ‘large em4 ployer’ means, in connection with a group health 

5 plan with respect to a plan year, an employer who 

6 employed an average of at least 51 employees on 

7 business days during the preceding calendar year 

8 and who employs at least 2 employees on the first 

9 day of the plan year. 

10 ‘‘(13) SMALL EMPLOYER.—The term ‘small em11 ployer’ means, in connection with a group health 

12 plan with respect to a plan year, an employer who 

13 is not a large employer. 

14 ‘‘(b) RULES OF CONSTRUCTION.— 

15 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur16 poses of determining whether a plan, fund, or pro17 gram is an employee welfare benefit plan which is an 

18 association health plan, and for purposes of applying 

19 this title in connection with such plan, fund, or pro20 gram so determined to be such an employee welfare 

21 benefit plan— 

22 ‘‘(A) in the case of a partnership, the term 

23 ‘employer’ (as defined in section 3(5)) includes 

24 the partnership in relation to the partners, and 

25 the term ‘employee’ (as defined in section 3(6)) 


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1 includes any partner in relation to the partner2 ship; and 

3 ‘‘(B) in the case of a self-employed indi4 vidual, the term ‘employer’ (as defined in sec5 tion 3(5)) and the term ‘employee’ (as defined 

6 in section 3(6)) shall include such individual. 

7 ‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED

8 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

9 case of any plan, fund, or program which was estab10 lished or is maintained for the purpose of providing 

11 medical care (through the purchase of insurance or 

12 otherwise) for employees (or their dependents) cov13 ered thereunder and which demonstrates to the Sec14 retary that all requirements for certification under 

15 this part would be met with respect to such plan, 

16 fund, or program if such plan, fund, or program 

17 were a group health plan, such plan, fund, or pro18 gram shall be treated for purposes of this title as an 

19 employee welfare benefit plan on and after the date 

20 of such demonstration.’’. 

21 (b) CONFORMING AMENDMENTS TO PREEMPTION

22 RULES.— 

23 (1) Section 514(b)(6) of such Act (29 U.S.C. 

24 1144(b)(6)) is amended by adding at the end the 

25 following new subparagraph: 


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1 ‘‘(E) The preceding subparagraphs of this paragraph 

2 do not apply with respect to any State law in the case 

3 of an association health plan which is certified under part 

4 8.’’. 

5 (2) Section 514 of such Act (29 U.S.C. 1144) 

6 is amended— 

7 (A) in subsection (b)(4), by striking ‘‘Sub8 section (a)’’ and inserting ‘‘Subsections (a) and 

9 (d)’’; 

10 (B) in subsection (b)(5), by striking ‘‘sub11 section (a)’’ in subparagraph (A) and inserting 

12 ‘‘subsection (a) of this section and subsections 

13 (a)(2)(B) and (b) of section 805’’, and by strik14 ing ‘‘subsection (a)’’ in subparagraph (B) and 

15 inserting ‘‘subsection (a) of this section or sub16 section (a)(2)(B) or (b) of section 805’’; 

17 (C) by redesignating subsections (d) and 

18 (e) as subsections (e) and (f), respectively; and 

19 (D) by inserting after subsection (c) the 

20 following new subsection: 

21 ‘‘(d)(1) Except as provided in subsection (b)(4), the 

22 provisions of this title shall supersede any and all State 

23 laws insofar as they may now or hereafter preclude, or 

24 have the effect of precluding, a health insurance issuer 

25 from offering health insurance coverage in connection with 


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1 an association health plan which is certified under part 

2 8. 

3 ‘‘(2) Except as provided in paragraphs (4) and (5) 

4 of subsection (b) of this section— 

5 ‘‘(A) In any case in which health insurance cov6 erage of any policy type is offered under an associa7 tion health plan certified under part 8 to a partici8 pating employer operating in such State, the provi9 sions of this title shall supersede any and all laws 

10 of such State insofar as they may preclude a health 

11 insurance issuer from offering health insurance cov12 erage of the same policy type to other employers op13 erating in the State which are eligible for coverage 

14 under such association health plan, whether or not 

15 such other employers are participating employers in 

16 such plan. 

17 ‘‘(B) In any case in which health insurance cov18 erage of any policy type is offered in a State under 

19 an association health plan certified under part 8 and 

20 the filing, with the applicable State authority (as de21 fined in section 812(a)(9)), of the policy form in 

22 connection with such policy type is approved by such 

23 State authority, the provisions of this title shall su24 persede any and all laws of any other State in which 

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1 sofar as they may preclude, upon the filing in the 

2 same form and manner of such policy form with the 

3 applicable State authority in such other State, the 

4 approval of the filing in such other State. 

5 ‘‘(3) Nothing in subsection (b)(6)(E) or the preceding 

6 provisions of this subsection shall be construed, with re7 spect to health insurance issuers or health insurance cov8 erage, to supersede or impair the law of any State— 

9 ‘‘(A) providing solvency standards or similar 

10 standards regarding the adequacy of insurer capital, 

11 surplus, reserves, or contributions, or 

12 ‘‘(B) relating to prompt payment of claims. 

13 ‘‘(4) For additional provisions relating to association 

14 health plans, see subsections (a)(2)(B) and (b) of section 

15 805. 

16 ‘‘(5) For purposes of this subsection, the term ‘asso17 ciation health plan’ has the meaning provided in section 

18 801(a), and the terms ‘health insurance coverage’, ‘par19 ticipating employer’, and ‘health insurance issuer’ have 

20 the meanings provided such terms in section 812, respec21 tively.’’. 

22 (3) Section 514(b)(6)(A) of such Act (29 

23 U.S.C. 1144(b)(6)(A)) is amended— 

24 (A) in clause (i)(II), by striking ‘‘and’’ at 

25 the end; 


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1 (B) in clause (ii), by inserting ‘‘and which 

2 does not provide medical care (within the mean3 ing of section 733(a)(2)),’’ after ‘‘arrange4 ment,’’, and by striking ‘‘title.’’ and inserting 

5 ‘‘title, and’’; and 

6 (C) by adding at the end the following new 

7 clause: 

8 ‘‘(iii) subject to subparagraph (E), in the case 

9 of any other employee welfare benefit plan which is 

10 a multiple employer welfare arrangement and which 

11 provides medical care (within the meaning of section 

12 733(a)(2)), any law of any State which regulates in13 surance may apply.’’. 

14 (4) Section 514(e) of such Act (as redesignated 

15 by paragraph (2)(C)) is amended— 

16 (A) by striking ‘‘Nothing’’ and inserting 

17 ‘‘(1) Except as provided in paragraph (2), noth18 ing’’; and 

19 (B) by adding at the end the following new 

20 paragraph: 

21 ‘‘(2) Nothing in any other provision of law enacted 

22 on or after the date of the enactment of the Small Busi23 ness Health Fairness Act of 2011 shall be construed to 

24 alter, amend, modify, invalidate, impair, or supersede any 


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1 provision of this title, except by specific cross-reference to 

2 the affected section.’’. 

3 (c) PLAN SPONSOR.—Section 3(16)(B) of such Act 

4 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

5 the following new sentence: ‘‘Such term also includes a 

6 person serving as the sponsor of an association health plan 

7 under part 8.’’. 

8 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE9 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

10 UNDER ASSOCIATION HEALTH PLANS.—Section 102(b) 

11 of such Act (29 U.S.C. 102(b)) is amended by adding at 

12 the end the following: ‘‘An association health plan shall 

13 include in its summary plan description, in connection 

14 with each benefit option, a description of the form of sol15 vency or guarantee fund protection secured pursuant to 

16 this Act or applicable State law, if any.’’. 

17 (e) SAVINGS CLAUSE.—Section 731(c) of such Act is 

18 amended by inserting ‘‘or part 8’’ after ‘‘this part’’. 

19 (f) REPORT TO THE CONGRESS REGARDING CERTIFI20 CATION OF SELF-INSURED ASSOCIATION HEALTH

21 PLANS.—Not later than January 1, 2014, the Secretary 

22 of Labor shall report to the Committee on Education and 

23 the Workforce of the House of Representatives and the 

24 Committee on Health, Education, Labor, and Pensions of 


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1 the Senate the effect association health plans have had, 

2 if any, on reducing the number of uninsured individuals. 

3 (g) CLERICAL AMENDMENT.—The table of contents 

4 in section 1 of the Employee Retirement Income Security 

5 Act of 1974 is amended by inserting after the item relat6 ing to section 734 the following new items: 

‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘801. Association health plans. 

‘‘802. Certification of association health plans. 

‘‘803. Requirements relating to sponsors and boards of trustees. 

‘‘804. Participation and coverage requirements. 

‘‘805. Other requirements relating to plan documents, contribution rates, and 

benefit options. 

‘‘806. Maintenance of reserves and provisions for solvency for plans providing 

health benefits in addition to health insurance coverage. 

‘‘807. Requirements for application and related requirements. 

‘‘808. Notice requirements for voluntary termination. 

‘‘809. Corrective actions and mandatory termination. 

‘‘810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage. 

‘‘811. State assessment authority. 

‘‘812. Definitions and rules of construction.’’. 

7 SEC. 622. CLARIFICATION OF TREATMENT OF SINGLE EM8 PLOYER ARRANGEMENTS. 

9 Section 3(40)(B) of the Employee Retirement Income 

10 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend11 ed— 

12 (1) in clause (i), by inserting after ‘‘control 

13 group,’’ the following: ‘‘except that, in any case in 

14 which the benefit referred to in subparagraph (A) 

15 consists of medical care (as defined in section 

16 812(a)(2)), two or more trades or businesses, wheth17 er or not incorporated, shall be deemed a single emVerDate Mar 15 2010 23:44 Dec 22, 2011 Jkt 019200 PO 00000 Frm 00193 Fmt 6652 Sfmt 6201 E:\BILLS\H3682.IH H3682

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1 ployer for any plan year of such plan, or any fiscal 

2 year of such other arrangement, if such trades or 

3 businesses are within the same control group during 

4 such year or at any time during the preceding 1-year 

5 period,’’; 

6 (2) in clause (iii), by striking ‘‘(iii) the deter7 mination’’ and inserting the following: 

8 ‘‘(iii)(I) in any case in which the benefit re9 ferred to in subparagraph (A) consists of medical 

10 care (as defined in section 812(a)(2)), the deter11 mination of whether a trade or business is under 

12 ‘common control’ with another trade or business 

13 shall be determined under regulations of the Sec14 retary applying principles consistent and coextensive 

15 with the principles applied in determining whether 

16 employees of two or more trades or businesses are 

17 treated as employed by a single employer under sec18 tion 4001(b), except that, for purposes of this para19 graph, an interest of greater than 25 percent may 

20 not be required as the minimum interest necessary 

21 for common control, or 

22 ‘‘(II) in any other case, the determination’’; 

23 (3) by redesignating clauses (iv) and (v) as 

24 clauses (v) and (vi), respectively; and 


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1 (4) by inserting after clause (iii) the following 

2 new clause: 

3 ‘‘(iv) in any case in which the benefit referred 

4 to in subparagraph (A) consists of medical care (as 

5 defined in section 812(a)(2)), in determining, after 

6 the application of clause (i), whether benefits are 

7 provided to employees of two or more employers, the 

8 arrangement shall be treated as having only one par9 ticipating employer if, after the application of clause 

10 (i), the number of individuals who are employees and 

11 former employees of any one participating employer 

12 and who are covered under the arrangement is 

13 greater than 75 percent of the aggregate number of 

14 all individuals who are employees or former employ15 ees of participating employers and who are covered 

16 under the arrangement,’’. 

17 SEC. 623. ENFORCEMENT PROVISIONS RELATING TO ASSO18 CIATION HEALTH PLANS. 

19 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

20 MISREPRESENTATIONS.—Section 501 of the Employee 

21 Retirement Income Security Act of 1974 (29 U.S.C. 1131) 

22 is amended— 

23 (1) by inserting ‘‘(a)’’ after ‘‘Sec. 501.’’; and 

24 (2) by adding at the end the following new sub25 section: 


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1 ‘‘(b) Any person who willfully falsely represents, to 

2 any employee, any employee’s beneficiary, any employer, 

3 the Secretary, or any State, a plan or other arrangement 

4 established or maintained for the purpose of offering or 

5 providing any benefit described in section 3(1) to employ6 ees or their beneficiaries as— 

7 ‘‘(1) being an association health plan which has 

8 been certified under part 8; 

9 ‘‘(2) having been established or maintained 

10 under or pursuant to one or more collective bar11 gaining agreements which are reached pursuant to 

12 collective bargaining described in section 8(d) of the 

13 National Labor Relations Act (29 U.S.C. 158(d)) or 

14 paragraph fourth of section 2 of the Railway Labor 

15 Act (45 U.S.C. 152, paragraph fourth) or which are 

16 reached pursuant to labor-management negotiations 

17 under similar provisions of State public employee re18 lations laws; or 

19 ‘‘(3) being a plan or arrangement described in 

20 section 3(40)(A)(i), 

21 shall, upon conviction, be imprisoned not more than 5 

22 years, be fined under title 18, United States Code, or 

23 both.’’. 


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1 (b) CEASE ACTIVITIES ORDERS.—Section 502 of 

2 such Act (29 U.S.C. 1132) is amended by adding at the 

3 end the following new subsection: 

4 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE5 SIST ORDERS.— 

6 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

7 upon application by the Secretary showing the oper8 ation, promotion, or marketing of an association 

9 health plan (or similar arrangement providing bene10 fits consisting of medical care (as defined in section 

11 733(a)(2))) that— 

12 ‘‘(A) is not certified under part 8, is sub13 ject under section 514(b)(6) to the insurance 

14 laws of any State in which the plan or arrange15 ment offers or provides benefits, and is not li16 censed, registered, or otherwise approved under 

17 the insurance laws of such State; or 

18 ‘‘(B) is an association health plan certified 

19 under part 8 and is not operating in accordance 

20 with the requirements under part 8 for such 

21 certification, 

22 a district court of the United States shall enter an 

23 order requiring that the plan or arrangement cease 

24 activities. 


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1 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

2 apply in the case of an association health plan or 

3 other arrangement if the plan or arrangement shows 

4 that— 

5 ‘‘(A) all benefits under it referred to in 

6 paragraph (1) consist of health insurance cov7 erage; and 

8 ‘‘(B) with respect to each State in which 

9 the plan or arrangement offers or provides ben10 efits, the plan or arrangement is operating in 

11 accordance with applicable State laws that are 

12 not superseded under section 514. 

13 ‘‘(3) ADDITIONAL EQUITABLE RELIEF.—The 

14 court may grant such additional equitable relief, in15 cluding any relief available under this title, as it 

16 deems necessary to protect the interests of the pub17 lic and of persons having claims for benefits against 

18 the plan.’’. 

19 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.— 

20 Section 503 of such Act (29 U.S.C. 1133) is amended by 

21 inserting ‘‘(a) IN GENERAL.—’’ before ‘‘In accordance’’, 

22 and by adding at the end the following new subsection: 

23 ‘‘(b) ASSOCIATION HEALTH PLANS.—The terms of 

24 each association health plan which is or has been certified 

25 under part 8 shall require the board of trustees or the 


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1 named fiduciary (as applicable) to ensure that the require2 ments of this section are met in connection with claims 

3 filed under the plan.’’. 

4 SEC. 624. COOPERATION BETWEEN FEDERAL AND STATE 

5 AUTHORITIES. 

6 Section 506 of the Employee Retirement Income Se7 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

8 at the end the following new subsection: 

9 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

10 TO ASSOCIATION HEALTH PLANS.— 

11 ‘‘(1) AGREEMENTS WITH STATES.—The Sec12 retary shall consult with the State recognized under 

13 paragraph (2) with respect to an association health 

14 plan regarding the exercise of— 

15 ‘‘(A) the Secretary’s authority under sec16 tions 502 and 504 to enforce the requirements 

17 for certification under part 8; and 

18 ‘‘(B) the Secretary’s authority to certify 

19 association health plans under part 8 in accord20 ance with regulations of the Secretary applica21 ble to certification under part 8. 

22 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

23 STATE.—In carrying out paragraph (1), the Sec24 retary shall ensure that only one State will be recog25 nized, with respect to any particular association 


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1 health plan, as the State with which consultation is 

2 required. In carrying out this paragraph— 

3 ‘‘(A) in the case of a plan which provides 

4 health insurance coverage (as defined in section 

5 812(a)(3)), such State shall be the State with 

6 which filing and approval of a policy type of7 fered by the plan was initially obtained, and 

8 ‘‘(B) in any other case, the Secretary shall 

9 take into account the places of residence of the 

10 participants and beneficiaries under the plan 

11 and the State in which the trust is main12 tained.’’. 

13 SEC. 625. EFFECTIVE DATE AND TRANSITIONAL AND 

14 OTHER RULES. 

15 (a) EFFECTIVE DATE.—The amendments made by 

16 this chapter shall take effect 1 year after the date of the 

17 enactment of this Act. The Secretary of Labor shall first 

18 issue all regulations necessary to carry out the amend19 ments made by this chapter within 1 year after the date 

20 of the enactment of this Act. 

21 (b) TREATMENT OF CERTAIN EXISTING HEALTH

22 BENEFITS PROGRAMS.— 

23 (1) IN GENERAL.—In any case in which, as of 

24 the date of the enactment of this Act, an arrange25 ment is maintained in a State for the purpose of 


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1 providing benefits consisting of medical care for the 

2 employees and beneficiaries of its participating em3 ployers, at least 200 participating employers make 

4 contributions to such arrangement, such arrange5 ment has been in existence for at least 10 years, and 

6 such arrangement is licensed under the laws of one 

7 or more States to provide such benefits to its par8 ticipating employers, upon the filing with the appli9 cable authority (as defined in section 812(a)(5) of 

10 the Employee Retirement Income Security Act of 

11 1974 (as amended by this chapter)) by the arrange12 ment of an application for certification of the ar13 rangement under part 8 of subtitle B of title I of 

14 such Act— 

15 (A) such arrangement shall be deemed to 

16 be a group health plan for purposes of title I 

17 of such Act; 

18 (B) the requirements of sections 801(a) 

19 and 803(a) of the Employee Retirement Income 

20 Security Act of 1974 shall be deemed met with 

21 respect to such arrangement; 

22 (C) the requirements of section 803(b) of 

23 such Act shall be deemed met, if the arrange24 ment is operated by a board of directors 

25 which— 


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1 (i) is elected by the participating em2 ployers, with each employer having one 

3 vote; and 

4 (ii) has complete fiscal control over 

5 the arrangement and which is responsible 

6 for all operations of the arrangement; 

7 (D) the requirements of section 804(a) of 

8 such Act shall be deemed met with respect to 

9 such arrangement; and 

10 (E) the arrangement may be certified by 

11 any applicable authority with respect to its op12 erations in any State only if it operates in such 

13 State on the date of certification. 

14 The provisions of this subsection shall cease to apply 

15 with respect to any such arrangement at such time 

16 after the date of the enactment of this Act as the 

17 applicable requirements of this subsection are not 

18 met with respect to such arrangement. 

19 (2) DEFINITIONS.—For purposes of this sub20 section, the terms ‘‘group health plan’’, ‘‘medical 

21 care’’, and ‘‘participating employer’’ shall have the 

22 meanings provided in section 812 of the Employee 

23 Retirement Income Security Act of 1974, except 

24 that the reference in paragraph (7) of such section 

25 to an ‘‘association health plan’’ shall be deemed a 


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1 reference to an arrangement referred to in this sub2 section. 

3 CHAPTER 2—TARGETED EFFORTS TO 

4 EXPAND ACCESS 

5 SEC. 631. EXTENDING COVERAGE OF DEPENDENTS. 

6 (a) EMPLOYEE RETIREMENT INCOME SECURITY ACT

7 OF 1974.— 

8 (1) IN GENERAL.—Part 7 of subtitle B of title 

9 I of the Employee Retirement Income Security Act 

10 of 1974 is amended by inserting after section 2714 

11 the following new section: 

12 ‘‘SEC. 715. EXTENDING COVERAGE OF DEPENDENTS. 

13 ‘‘(a) IN GENERAL.—In the case of a group health 

14 plan, or health insurance coverage offered in connection 

15 with a group health plan, that treats as a beneficiary 

16 under the plan an individual who is a dependent child of 

17 a participant or beneficiary under the plan, the plan or 

18 coverage shall continue to treat the individual as a depend19 ent child without regard to the individual’s age through 

20 at least the end of the plan year in which the individual 

21 turns an age specified in the plan, but not less than 23 

22 years of age. 

23 ‘‘(b) CONSTRUCTION.—Nothing in this section shall 

24 be construed as requiring a group health plan to provide 

25 benefits for dependent children as beneficiaries under the 


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1 plan or to require a participant to elect coverage of de2 pendent children.’’. 

3 (2) CLERICAL AMENDMENT.—The table of con4 tents of such Act is amended by inserting after the 

5 item relating to section 714 the following new item: 

‘‘Sec. 715. Extending coverage of dependents.’’. 

6 (b) PHSA.—Title XXVII of the Public Health Serv7 ice Act is amended by inserting after section 2707 the fol8 lowing new section: 

9 ‘‘SEC. 2708. EXTENDING COVERAGE OF DEPENDENTS. 

10 ‘‘(a) IN GENERAL.—In the case of a group health 

11 plan, or health insurance coverage offered in connection 

12 with a group health plan, that treats as a beneficiary 

13 under the plan an individual who is a dependent child of 

14 a participant or beneficiary under the plan, the plan or 

15 coverage shall continue to treat the individual as a depend16 ent child without regard to the individual’s age through 

17 at least the end of the plan year in which the individual 

18 turns an age specified in the plan, but not less than 23 

19 years of age. 

20 ‘‘(b) CONSTRUCTION.—Nothing in this section shall 

21 be construed as requiring a group health plan to provide 

22 benefits for dependent children as beneficiaries under the 

23 plan or to require a participant to elect coverage of de24 pendent children.’’. 

25 (c) IRC.— 


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1 (1) IN GENERAL.—Subchapter B of chapter 

2 100 of the Internal Revenue Code of 1986 is amend3 ed by adding at the end the following new section: 

4 ‘‘SEC. 9814. EXTENDING COVERAGE OF DEPENDENTS. 

5 ‘‘(a) IN GENERAL.—In the case of a group health 

6 plan that treats as a beneficiary under the plan an indi7 vidual who is a dependent child of a participant or bene8 ficiary under the plan, the plan shall continue to treat the 

9 individual as a dependent child without regard to the indi10 vidual’s age through at least the end of the plan year in 

11 which the individual turns an age specified in the plan, 

12 but not less than 23 years of age. 

13 ‘‘(b) CONSTRUCTION.—Nothing in this section shall 

14 be construed as requiring a group health plan to provide 

15 coverage for dependent children as beneficiaries under the 

16 plan or to require a participant to elect coverage of de17 pendent children.’’. 

18 (2) CLERICAL AMENDMENT.—The table of sec19 tions in such subchapter is amended by adding at 

20 the end the following new item: 

‘‘Sec. 9814. Extending coverage of dependents.’’. 

21 (d) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to group health plans for plan 

23 years beginning more than 3 months after the date of the 

24 enactment of this Act and shall apply to individuals who 

25 are dependent children under a group health plan, or 


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1 health insurance coverage offered in connection with such 

2 a plan, on or after such date. 

3 SEC. 632. ALLOWING AUTO-ENROLLMENT FOR EMPLOYER 

4 SPONSORED COVERAGE. 

5 (a) IN GENERAL.—No State shall establish a law 

6 that prevents an employer from instituting auto-enroll7 ment for coverage of a participant or beneficiary, including 

8 current employees, under a group health plan, or health 

9 insurance coverage offered in connection with such a plan, 

10 so long as the participant or beneficiary has the option 

11 of declining such coverage. 

12 (b) AUTO-ENROLLMENT.— 

13 (1) NOTICE REQUIRED.—Employers with auto14 enrollment under a group health plan or health in15 surance coverage shall provide annual notification, 

16 within a reasonable period before the beginning of 

17 each plan year, to each employee eligible to partici18 pate in the plan. The notice shall explain the em19 ployee contribution to such plan and the employee’s 

20 right to decline coverage. 

21 (2) TREATMENT OF NON-ACTION.—After a rea22 sonable period of time after receipt of the notice, if 

23 an employee fails to make an affirmative declaration 

24 declining coverage, then such an employee may be 


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1 enrolled in the group health plan or health insurance 

2 coverage offered in connection with such a plan.’’. 

3 (c) CONSTRUCTION.—Nothing in this section shall be 

4 construed to supersede State law which establishes, imple5 ments, or continues in effect any standard or requirement 

6 relating to employers in connection with payroll or the 

7 sponsoring of employer sponsored health insurance cov8 erage except to the extent that such standard or require9 ment prevents an employer from instituting the auto-en10 rollment described in subsection (a). 

11 TITLE VII—STOPPING MEDI12 CARE, WASTE, FRAUD, AND 

13 ABUSE AND INCREASING PEN14 ALTIES FOR ABUSERS 

15 SEC. 701. INCREASED CIVIL MONEY PENALTIES AND CRIMI16 NAL FINES FOR MEDICARE FRAUD AND 

17 ABUSE. 

18 (a) INCREASED CIVIL MONEY PENALTIES.—Section 

19 1128A of the Social Security Act (42 U.S.C. 1320a–7a) 

20 is amended— 

21 (1) in subsection (a), in the matter following 

22 paragraph (10)— 

23 (A) by striking ‘‘$10,000’’ each place it 

24 appears and inserting ‘‘$20,000’’; 


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1 (B) by striking ‘‘$15,000’’ and inserting 

2 ‘‘$30,000’’; and 

3 (C) by striking ‘‘$50,000’’ each place it ap4 pears and inserting ‘‘$100,000’’; and 

5 (2) in subsection (b)— 

6 (A) in paragraph (1), in the flush matter 

7 following subparagraph (B), by striking 

8 ‘‘$2,000’’ and inserting ‘‘$4,000’’; 

9 (B) in paragraph (2), by striking ‘‘$2,000’’ 

10 and inserting ‘‘$4,000’’; and 

11 (C) in paragraph (3)(A)(i), by striking 

12 ‘‘$5,000’’ and inserting ‘‘$10,000’’. 

13 (b) INCREASED CRIMINAL FINES.—Section 1128B of 

14 the Social Security Act (42 U.S.C. 1320a–7b) is amend15 ed— 

16 (1) in subsection (a), in the flush matter fol17 lowing paragraph (6)— 

18 (A) by striking ‘‘$25,000’’ and inserting 

19 ‘‘$100,000’’; and 

20 (B) by striking ‘‘$10,000’’ and inserting 

21 ‘‘$20,000’’; 

22 (2) in subsection (b)— 

23 (A) in paragraph (1), in the flush matter 

24 following subparagraph (B), by striking 

25 ‘‘$25,000’’ and inserting ‘‘$100,000’’; and 


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1 (B) in paragraph (2), in the flush matter 

2 following subparagraph (B), by striking 

3 ‘‘$25,000’’ and inserting ‘‘$100,000’’; 

4 (3) in subsection (c), by striking ‘‘$25,000’’ and 

5 inserting ‘‘$100,000’’; 

6 (4) in subsection (d), in the second flush matter 

7 following subparagraph (B), by striking ‘‘$25,000’’ 

8 and inserting ‘‘$100,000’’; and 

9 (5) in subsection (e), by striking ‘‘$2,000’’ and 

10 inserting ‘‘$4,000’’. 

11 (c) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to civil money penalties and fines 

13 imposed for actions taken on or after the date of enact14 ment of this Act. 

15 SEC. 702. INCREASED SENTENCES FOR FELONIES INVOLV16 ING MEDICARE FRAUD AND ABUSE. 

17 (a) FALSE STATEMENTS AND REPRESENTATIONS.— 

18 Section 1128B(a) of the Social Security Act (42 U.S.C. 

19 1320a–7b(a)) is amended, in clause (i) of the flush matter 

20 following paragraph (6), by striking ‘‘not more than five 

21 years’’ and inserting ‘‘not more than 10 years’’. 

22 (b) ANTI-KICKBACK.—Section 1128B(b) of the So23 cial Security Act (42 U.S.C. 1320a–7b(b)) is amended— 

24 (1) in paragraph (1), in the flush matter fol25 lowing subparagraph (B), by striking ‘‘not more 


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1 than five years’’ and inserting ‘‘not more than 10 

2 years’’; and 

3 (2) in paragraph (2), in the flush matter fol4 lowing subparagraph (B), by striking ‘‘not more 

5 than five years’’ and inserting ‘‘not more than 10 

6 years’’. 

7 (c) FALSE STATEMENT OR REPRESENTATION WITH

8 RESPECT TO CONDITIONS OR OPERATIONS OF FACILI9 TIES.—Section 1128B(c) of the Social Security Act (42 

10 U.S.C. 1320a–7b(c)) is amended by striking ‘‘not more 

11 than five years’’ and inserting ‘‘not more than 10 years’’. 

12 (d) EXCESS CHARGES.—Section 1128B(d) of the So13 cial Security Act (42 U.S.C. 1320a–7b(d)) is amended, in 

14 the second flush matter following subparagraph (B), by 

15 striking ‘‘not more than five years’’ and inserting ‘‘not 

16 more than 10 years’’. 

17 (e) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to criminal penalties imposed for 

19 actions taken on or after the date of enactment of this 

20 Act. 

21 SEC. 703. OTHER DME SUPPLIER ANTI-FRAUD AND ABUSE 

22 PROVISIONS. 

23 (a) MANDATORY PERIODIC SITE INSPECTIONS FOR

24 DME SUPPLIERS.—The Secretary of Health and Human 

25 Services shall require, as a condition for participation of 


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1 suppliers of durable medical equipment under part B of 

2 title XVIII of the Social Security Act— 

3 (1) a site inspection to be conducted for each 

4 such supplier that has not previously participated 

5 under such part within 6 months of the date of its 

6 initial participation under such part; and 

7 (2) a site inspection at least every 2 years to 

8 be conducted for each such supplier that has pre9 viously participated under such part. 

10 (b) POST-PAYMENT REVIEW.—The Secretary also 

11 shall provide conduct post-payment reviews of claims for 

12 items and services furnished under such part by durable 

13 medical equipment suppliers that begin participation 

14 under such part after the date of the enactment of this 

15 Act. Such reviews shall be conducted not less often than 

16 after the first 6, 12, and 18 months of such participation. 

17 (c) AVAILABILITY OF FUNDS.—Funds in the Health 

18 Care Fraud and Abuse Control Account under section 

19 1817(k) of the Social Security Act (42 U.S.C. 1395i(k)) 

20 shall be available for the conduct of site inspections and 

21 post-payment review required under this section. 

22 (d) TREATMENT OF SKILLED NURSING FACILI23 TIES.—In this section, a skilled nursing facility shall not 

24 be treated as a supplier of durable medical equipment with 

25 respect to any individual who is a resident of such facility. 


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212 

•HR 3682 IH

1 SEC. 704. RETENTION OF CERTAIN FRAUD AND ABUSE PRO2 VISIONS. 

3 Section 101 shall not apply to the provisions (includ4 ing amendments made by) title VI of Public Law 111– 

5 148, other than subtitles D, H, and I of such title, and 

6 provisions of Public Law 111–152 insofar as they relative 

7 to such provisions. 

8 SEC. 705. ENSURING TIMELY ENFORCEMENT OF MEDICARE 

9 SECONDARY PAYER REQUIREMENTS IN LI10 ABILITY CASES. 

11 The Secretary of the Health and Human Services, 

12 acting through the Administrator of the Centers for Medi13 care & Medicaid Services, shall affirmatively establish, for 

14 initial implementation not later than 90 days after the 

15 date of the enactment of this Act, a plan to require appli16 cable plans (as defined in subparagraph (F) of section 

17 1862(b)(8) of the Social Security Act (42 U.S.C. 

18 1395y(b)(8)), as added by section 111(a) of the Medicare, 

19 Medicaid, and SCHIP Extension Act of 2007 (Public Law 

20 110–173)), to meet the determination and submission re21 quirements under subparagraph (A) of such section 

22 1862(b)(8). 

Æ 


tjames on DSK6SPTVN1PROD with BILLS