I 

112TH CONGRESS 

1ST SESSION H. R. 397 

To repeal the Patient Protection and Affordable Care Act and the Health 

Care and Education Reconciliation Act of 2010 and to take meaningful 

steps to lower health care costs and increase access to health insurance 

coverage without raising taxes, cutting Medicare benefits for seniors, 

adding to the national deficit, intervening in the doctor-patient relationship, or instituting a government takeover of health care. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 24, 2011 

Mr. HERGER (for himself, Mr. SAM JOHNSON of Texas, Mr. TIBERI, Mr. 

REICHERT, Mr. GERLACH, Mr. BACHUS, Mrs. BLACKBURN, Mr. DENT, 

Mr. HARPER, Mr. MCCAUL, Mrs. MCMORRIS RODGERS, Mr. GARY G. 

MILLER of California, and Mr. SESSIONS) 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, House Administration, Natural Resources, Appropriations, and Rules, 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 the Health Care and Education Reconciliation Act 

of 2010 and to take meaningful steps to lower health 

care costs and increase access to health insurance coverage without raising taxes, cutting Medicare benefits 

for seniors, adding to the national deficit, intervening 

in the doctor-patient relationship, or instituting a government takeover of health care. 


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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; PURPOSE; TABLE OF CONTENTS. 

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

5 ‘‘Reform Americans Can Afford Act of 2011’’. 

6 (b) PURPOSE.—The purpose of this Act is to take 

7 meaningful steps to lower health care costs and increase 

8 access to health insurance coverage (especially for individ9 uals with preexisting conditions) without— 

10 (1) raising taxes; 

11 (2) cutting Medicare benefits for seniors; 

12 (3) adding to the national deficit; 

13 (4) intervening in the doctor-patient relation14 ship; or 

15 (5) instituting a government takeover of health 

16 care. 

17 (c) TABLE OF CONTENTS.—The table of contents of 

18 this Act is as follows: 

Sec. 1. Short title; purpose; table of contents. 

Sec. 2. Repeal of the Patient Protection and Affordable Care Act and the 

Health Care and Education Reconciliation Act of 2010. 

DIVISION A—MAKING HEALTH CARE COVERAGE AFFORDABLE 

FOR EVERY AMERICAN 

TITLE I—ENSURING COVERAGE FOR INDIVIDUALS WITH PREEXISTING CONDITIONS AND MULTIPLE HEALTH CARE NEEDS 

Sec. 101. Establish universal access programs to improve high risk pools and 

reinsurance markets. 

Sec. 102. Elimination of certain requirements for guaranteed availability in individual market. 

Sec. 103. No annual or lifetime spending caps. 

Sec. 104. Preventing unjust cancellation of insurance coverage. 


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TITLE II—REDUCING HEALTH CARE PREMIUMS AND THE 

NUMBER OF UNINSURED AMERICANS 

Sec. 111. State innovation programs. 

Sec. 112. Health plan finders. 

Sec. 113. Administrative simplification. 

DIVISION B—IMPROVING ACCESS TO HEALTH CARE 

TITLE I—EXPANDING ACCESS AND LOWERING COSTS FOR SMALL 

BUSINESSES 

Sec. 201. Rules governing association health plans. 

Sec. 202. Clarification of treatment of single employer arrangements. 

Sec. 203. Enforcement provisions relating to association health plans. 

Sec. 204. Cooperation between Federal and State authorities. 

Sec. 205. Effective date and transitional and other rules. 

TITLE II—TARGETED EFFORTS TO EXPAND ACCESS 

Sec. 211. Extending coverage of dependents. 

Sec. 212. Allowing auto-enrollment for employer sponsored coverage. 

TITLE III—EXPANDING CHOICES BY ALLOWING AMERICANS TO 

BUY HEALTH CARE COVERAGE ACROSS STATE LINES 

Sec. 221. Interstate purchasing of health insurance. 

TITLE IV—IMPROVING HEALTH SAVINGS ACCOUNTS 

Sec. 231. Saver’s credit for contributions to health savings accounts. 

Sec. 232. HSA funds for premiums for high deductible health plans. 

Sec. 233. Requiring greater coordination between HDHP administrators and 

HSA account administrators so that enrollees can enroll in 

both at the same time. 

Sec. 234. Special rule for certain medical expenses incurred before establishment of account. 

DIVISION C—ENACTING REAL MEDICAL LIABILITY REFORM 

Sec. 301. Encouraging speedy resolution of claims. 

Sec. 302. Compensating patient injury. 

Sec. 303. Maximizing patient recovery. 

Sec. 304. Additional health benefits. 

Sec. 305. Punitive damages. 

Sec. 306. Authorization of payment of future damages to claimants in health 

care lawsuits. 

Sec. 307. Definitions. 

Sec. 308. Effect on other laws. 

Sec. 309. State flexibility and protection of States’ rights. 

Sec. 310. Applicability; effective date. 

DIVISION D—PROTECTING THE DOCTOR-PATIENT RELATIONSHIP 

Sec. 401. Rule of construction. 

Sec. 402. Repeal of Federal Coordinating Council for Comparative Effectiveness Research. 


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DIVISION E—INCENTIVIZING WELLNESS AND QUALITY 

IMPROVEMENTS 

Sec. 501. Incentives for prevention and wellness programs. 

DIVISION F—PROTECTING TAXPAYERS 

Sec. 601. Provide full funding to HHS OIG and HCFAC. 

Sec. 602. Prohibiting taxpayer funded abortions and conscience protections. 

Sec. 603. Improved enforcement of the Medicare and Medicaid secondary payer 

provisions. 

Sec. 604. Strengthen Medicare provider enrollment standards and safeguards. 

Sec. 605. Tracking banned providers across State lines. 

DIVISION G—PATHWAY FOR BIOSIMILAR BIOLOGICAL PRODUCTS 

Sec. 701. Licensure pathway for biosimilar biological products. 

Sec. 702. Fees relating to biosimilar biological products. 

Sec. 703. Amendments to certain patent provisions. 

1 SEC. 2. REPEAL OF THE PATIENT PROTECTION AND AF2 FORDABLE CARE ACT AND THE HEALTH 

3 CARE AND EDUCATION RECONCILIATION ACT 

4 OF 2010. 

5 (a) PATIENT PROTECTION AND AFFORDABLE CARE

6 ACT.—Effective as of the enactment of the Patient Pro7 tection and Affordable Care Act, such Act is repealed, and 

8 the provisions of law amended or repealed by such Act 

9 are restored or revived as if such Act had not been en10 acted. 

11 (b) HEALTH CARE AND EDUCATION RECONCILI12 ATION ACT OF 2010.—Effective as of the enactment of 

13 the Health Care and Education Reconciliation Act of 

14 2010, such Act is repealed, and the provisions of law 

15 amended or repealed by such Act are restored or revived 

16 as if such Act had not been enacted. 


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1 DIVISION A—MAKING HEALTH 

2 CARE COVERAGE AFFORD3 ABLE FOR EVERY AMERICAN 

4 TITLE I—ENSURING COVERAGE 

5 FOR INDIVIDUALS WITH PRE6 EXISTING CONDITIONS AND 

7 MULTIPLE HEALTH CARE 

8 NEEDS 

9 SEC. 101. ESTABLISH UNIVERSAL ACCESS PROGRAMS TO 

10 IMPROVE HIGH RISK POOLS AND REINSUR11 ANCE MARKETS. 

12 (a) STATE REQUIREMENT.— 

13 (1) IN GENERAL.—Not later than July 1, 2011, 

14 each State shall— 

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

16 (i) a qualified State reinsurance pro17 gram described in subsection (b); or 

18 (ii) qualifying State high risk pool de19 scribed in subsection (c)(1); and 

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

21 operation of such a program from State funds 

22 an amount equivalent to the portion of State 

23 funds derived from State premium assessments 

24 (as defined by the Secretary) that are not oth25 erwise used on State health care programs. 


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1 (2) RELATION TO CURRENT QUALIFIED HIGH

2 RISK POOL PROGRAM.— 

3 (A) STATES NOT OPERATING A QUALIFIED

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

5 is not operating a current section 2745 quali6 fied high risk pool as of the date of the enact7 ment of this Act— 

8 (i) the State may only meet the re9 quirement of paragraph (1) through the 

10 operation of a qualified State reinsurance 

11 program described in subsection (b); and 

12 (ii) the State’s operation of such a re13 insurance program shall be treated, for 

14 purposes of section 2745 of the Public 

15 Health Service Act, as the operation of a 

16 qualified high risk pool described in such 

17 section. 

18 (B) STATE OPERATING A QUALIFIED HIGH

19 RISK POOL.—In the case of a State that is op20 erating a current section 2745 qualified high 

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

22 Act— 

23 (i) as of July 1, 2011, such a pool 

24 shall not be treated as a qualified high risk 

25 pool under section 2745 of the Public 


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1 Health Service Act unless the pool is a 

2 qualifying State high risk pool described in 

3 subsection (c)(1); and 

4 (ii) the State may use premium as5 sessment funds described in paragraph 

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

7 a pool to operation of a qualified State re8 insurance program described in subsection 

9 (b). 

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

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

12 fiscal health, as determined in accordance with 

13 standards established by the National Association of 

14 Insurance Commissioners and as approved by the 

15 State Insurance Commissioner involved, the require16 ment of paragraph (1)(B) shall be deemed to be 

17 met. 

18 (b) QUALIFIED STATE REINSURANCE PROGRAM.— 

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

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

21 program operated by a State program that provides 

22 reinsurance for health insurance coverage offered in 

23 the small group market in accordance with the 

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

25 of the enactment of this Act). 


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1 (2) FORM OF PROGRAM.—A qualified State re2 insurance program may provide reinsurance— 

3 (A) on a prospective or retrospective basis; 

4 and 

5 (B) on a basis that protects health insur6 ance issuers against the annual aggregate 

7 spending of their enrollees as well as purchase 

8 protection against individual catastrophic costs. 

9 (3) SATISFACTION OF HIPAA REQUIREMENT.— 

10 A qualified State reinsurance program shall be 

11 deemed, for purposes of section 2745 of the Public 

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

13 under such section. 

14 (c) QUALIFYING STATE HIGH RISK POOL.— 

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

16 pool described in this subsection means a current 

17 section 2745 qualified high risk pool that meets the 

18 following requirements: 

19 (A) The pool must provide at least two 

20 coverage options, one of which must be a high 

21 deductible health plan coupled with a health 

22 savings account. 

23 (B) The pool must be funded with a stable 

24 funding source. 


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1 (C) The pool must eliminate any waiting 

2 lists so that all eligible residents who are seek3 ing coverage through the pool should be allowed 

4 to receive coverage through the pool. 

5 (D) The pool must allow for coverage of 

6 individuals who, but for the 24-month disability 

7 waiting period under section 226(b) of the So8 cial Security Act, would be eligible for Medicare 

9 during the period of such waiting period. 

10 (E) The pool must limit the pool premiums 

11 to no more than 150 percent of the average 

12 premium for applicable standard risk rates in 

13 that State. 

14 (F) The pool must conduct education and 

15 outreach initiatives so that residents and bro16 kers understand that the pool is available to eli17 gible residents. 

18 (G) The pool must provide coverage for 

19 preventive services and disease management for 

20 chronic diseases. 

21 (2) VERIFICATION OF CITIZENSHIP OR ALIEN

22 QUALIFICATION.— 

23 (A) IN GENERAL.—Notwithstanding any 

24 other provision of law, only citizens and nation25 als of the United States shall be eligible to parVerDate Mar 15 2010 00:55 Jan 26, 2011 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H397.IH H397

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1 ticipate in a qualifying State high risk pool that 

2 receives funds under section 2745 of the Public 

3 Health Service Act or this section. 

4 (B) CONDITION OF PARTICIPATION.—As a 

5 condition of a State receiving such funds, the 

6 Secretary shall require the State to certify, to 

7 the satisfaction of the Secretary, that such 

8 State requires all applicants for coverage in the 

9 qualifying State high risk pool to provide satis10 factory documentation of citizenship or nation11 ality in a manner consistent with section 

12 1903(x) of the Social Security Act. 

13 (C) RECORDS.—The Secretary shall keep 

14 sufficient records such that a determination of 

15 citizenship or nationality only has to be made 

16 once for any individual under this paragraph. 

17 (3) RELATION TO SECTION 2745.—As of Janu18 ary 1, 2012, a pool shall not qualify as qualified 

19 high risk pool under section 2745 of the Public 

20 Health Service Act unless the pool is a qualifying 

21 State high risk pool described in paragraph (1). 

22 (d) WAIVERS.—In order to accommodate new and in23 novative programs, the Secretary may waive such require24 ments of this section for qualified State reinsurance proVerDate Mar 15 2010 00:55 Jan 26, 2011 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H397.IH H397

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1 grams and for qualifying State high risk pools as the Sec2 retary deems appropriate. 

3 (e) FUNDING.—In addition to any other amounts ap4 propriated, there is appropriated to carry out section 2745 

5 of the Public Health Service Act (including through a pro6 gram or pool described in subsection (a)(1))— 

7 (1) $15,000,000,000 for the period of fiscal 

8 years 2012 through 2021; and 

9 (2) an additional $10,000,000,000 for the pe10 riod of fiscal years 2017 through 2021. 

11 (f) DEFINITIONS.—In this section: 

12 (1) HEALTH INSURANCE COVERAGE; HEALTH

13 INSURANCE ISSUER.—The terms ‘‘health insurance 

14 coverage’’ and ‘‘health insurance issuer’’ have the 

15 meanings given such terms in section 2791 of the 

16 Public Health Service Act. 

17 (2) CURRENT SECTION 2745 QUALIFIED HIGH

18 RISK POOL.—The term ‘‘current section 2745 quali19 fied high risk pool’’ has the meaning given the term 

20 ‘‘qualified high risk pool’’ under section 2745(g) of 

21 the Public Health Service Act as in effect as of the 

22 date of the enactment of this Act. 

23 (3) SECRETARY.—The term ‘‘Secretary’’ means 

24 Secretary of Health and Human Services. 


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1 (4) STANDARD RISK RATE.—The term ‘‘stand2 ard risk rate’’ means a rate that— 

3 (A) is determined under the State high 

4 risk pool by considering the premium rates 

5 charged by other health insurance issuers offer6 ing health insurance coverage to individuals in 

7 the insurance market served; 

8 (B) is established using reasonable actu9 arial techniques; and 

10 (C) reflects anticipated claims experience 

11 and expenses for the coverage involved. 

12 (5) STATE.—The term ‘‘State’’ means any of 

13 the 50 States or the District of Columbia. 

14 SEC. 102. ELIMINATION OF CERTAIN REQUIREMENTS FOR 

15 GUARANTEED AVAILABILITY IN INDIVIDUAL 

16 MARKET. 

17 (a) IN GENERAL.—Section 2741(b) of the Public 

18 Health Service Act (42 U.S.C. 300gg–41(b)) is amend19 ed— 

20 (1) in paragraph (1)— 

21 (A) by striking ‘‘(1)(A)’’ and inserting 

22 ‘‘(1)’’; and 

23 (B) by striking ‘‘and (B)’’ and all that fol24 lows up to the semicolon at the end; 


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1 (2) by adding ‘‘and’’ at the end of paragraph 

2 (2); 

3 (3) in paragraph (3)— 

4 (A) by striking ‘‘(1)(A)’’ and inserting 

5 ‘‘(1)’’; and 

6 (B) by striking the semicolon at the end 

7 and inserting a period; and 

8 (4) by striking paragraphs (4) and (5). 

9 (b) EFFECTIVE DATE.—The amendments made by 

10 subsection (a) shall take effect on the date of the enact11 ment of this Act. 

12 SEC. 103. NO ANNUAL OR LIFETIME SPENDING CAPS. 

13 Notwithstanding any other provision of law, a health 

14 insurance issuer (including an entity licensed to sell insur15 ance with respect to a State or group health plan) may 

16 not apply an annual or lifetime aggregate spending cap 

17 on any health insurance coverage or plan offered by such 

18 issuer. The previous sentence shall not apply with respect 

19 to a health plan if, as of the date of the enactment of 

20 this Act, the imposition on such plan of an annual or life21 time aggregate spending cap would result in a significant 

22 decrease in access to benefits under the plan or would sig23 nificantly increase premiums under the plan. 


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1 SEC. 104. PREVENTING UNJUST CANCELLATION OF INSUR2 ANCE COVERAGE. 

3 (a) CLARIFICATION REGARDING APPLICATION OF

4 GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH

5 INSURANCE COVERAGE.—Section 2742 of the Public 

6 Health Service Act (42 U.S.C. 300gg–42) is amended— 

7 (1) in its heading, by inserting ‘‘, CONTINU8 ATION IN FORCE, INCLUDING PROHIBITION OF

9 RESCISSION,’’ after ‘‘GUARANTEED RENEW10 ABILITY’’; 

11 (2) in subsection (a), by inserting ‘‘, including 

12 without rescission,’’ after ‘‘continue in force’’; and 

13 (3) in subsection (b)(2), by inserting before the 

14 period at the end the following: ‘‘, including inten15 tional concealment of material facts regarding a 

16 health condition related to the condition for which 

17 coverage is being claimed’’. 

18 (b) OPPORTUNITY FOR INDEPENDENT, EXTERNAL

19 THIRD PARTY REVIEW IN CERTAIN CASES.—Subpart 1 

20 of part B of title XXVII of the Public Health Service Act 

21 is amended by adding at the end the following new section: 

22 ‘‘SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL 

23 THIRD PARTY REVIEW IN CERTAIN CASES. 

24 ‘‘(a) NOTICE AND REVIEW RIGHT.—If a health in25 surance issuer determines to nonrenew or not continue in 

26 force, including rescind, health insurance coverage for an 


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1 individual in the individual market on the basis described 

2 in section 2742(b)(2) before such nonrenewal, discontinu3 ation, or rescission, may take effect the issuer shall pro4 vide the individual with notice of such proposed non5 renewal, discontinuation, or rescission and an opportunity 

6 for a review of such determination by an independent, ex7 ternal third party under procedures specified by the Sec8 retary. 

9 ‘‘(b) INDEPENDENT DETERMINATION.—If the indi10 vidual requests such review by an independent, external 

11 third party of a nonrenewal, discontinuation, or rescission 

12 of health insurance coverage, the coverage shall remain in 

13 effect until such third party determines that the coverage 

14 may be nonrenewed, discontinued, or rescinded under sec15 tion 2742(b)(2).’’. 

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

17 this section shall apply after the date of the enactment 

18 of this Act with respect to health insurance coverage 

19 issued before, on, or after such date. 


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1 TITLE II—REDUCING HEALTH 

2 CARE PREMIUMS AND THE 

3 NUMBER OF UNINSURED 

4 AMERICANS 

5 SEC. 111. STATE INNOVATION PROGRAMS. 

6 (a) PROGRAMS THAT REDUCE THE COST OF

7 HEALTH INSURANCE PREMIUMS.— 

8 (1) PAYMENTS TO STATES.— 

9 (A) FOR PREMIUM REDUCTIONS IN THE

10 SMALL GROUP MARKET.—If the Secretary de11 termines that a State has reduced the average 

12 per capita premium for health insurance cov13 erage in the small group market in year 3, in 

14 year 6, or year 9 (as defined in subsection (c)) 

15 below the premium baseline for such year (as 

16 defined paragraph (2)), the Secretary shall pay 

17 the State an amount equal to the product of— 

18 (i) bonus premium percentage (as de19 fined in paragraph (3)) for the State, mar20 ket, and year; and 

21 (ii) the maximum State premium pay22 ment amount (as defined in paragraph (4)) 

23 for the State, market, and year 

24 (B) FOR PREMIUM REDUCTIONS IN THE

25 INDIVIDUAL MARKET.—If the Secretary deterVerDate Mar 15 2010 00:55 Jan 26, 2011 Jkt 099200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\H397.IH H397

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1 mines that a State has reduced the average per 

2 capita premium for health insurance coverage 

3 in the individual market in year 3, in year 6, 

4 or in year 9 below the premium baseline for 

5 such year, the Secretary shall pay the State an 

6 amount equal to the product of— 

7 (i) bonus premium percentage for the 

8 State, market, and year; and 

9 (ii) the maximum State premium pay10 ment amount for the State, market, and 

11 year. 

12 (2) PREMIUM BASELINE.—For purposes of this 

13 subsection, the term ‘‘premium baseline’’ means, for 

14 a market in a State— 

15 (A) for year 1, the average per capita pre16 miums for health insurance coverage in such 

17 market in the State in such year; or 

18 (B) for a subsequent year, the baseline for 

19 the market in the State for the previous year 

20 under this paragraph increased by a percentage 

21 specified in accordance with a formula estab22 lished by the Secretary, in consultation with the 

23 Congressional Budget Office and the Bureau of 

24 the Census, that takes into account at least the 

25 following: 


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1 (i) GROWTH FACTOR.—The inflation 

2 in the costs of inputs to health care serv3 ices in the year. 

4 (ii) HISTORIC PREMIUM GROWTH

5 RATES.—Historic growth rates, during the 

6 10 years before year 1, of per capita pre7 miums for health insurance coverage. 

8 (iii) DEMOGRAPHIC CONSIDER9 ATIONS.—Historic average changes in the 

10 demographics of the population covered 

11 that impact on the rate of growth of per 

12 capita health care costs. 

13 (3) BONUS PREMIUM PERCENTAGE DEFINED.— 

14 (A) IN GENERAL.—For purposes of this 

15 subsection, the term ‘‘bonus premium percent16 age’’ means, for the small group market or indi17 vidual market in a State for a year, such per18 centage as determined in accordance with the 

19 following table based on the State’s premium 

20 performance level (as defined in subparagraph 

21 (B)) for such market and year: 


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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%. 

1 (B) PREMIUM PERFORMANCE LEVEL.—For 

2 purposes of this subsection, the term ‘‘premium 

3 performance level’’ means, for a State, market, 

4 and year, the percentage reduction in the aver5 age per capita premiums for health insurance 

6 coverage for the State, market, and year, as 

7 compared to the premium baseline for such 

8 State, market, and year. 

9 (4) MAXIMUM STATE PREMIUM PAYMENT

10 AMOUNT DEFINED.—For purposes of this sub11 section, the term ‘‘maximum State premium pay12 ment amount’’ means, for a State for the small 

13 group market or the individual market for a year, 

14 the product of— 

15 (A) the proportion (as determined by the 

16 Secretary), of the number of nonelderly individ17 uals lawfully residing in all the States who are 


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1 enrolled in health insurance coverage in the re2 spective market in the year, who are residents 

3 of the State; and 

4 (B) the amount available for obligation 

5 from amounts appropriated under subsection 

6 (d) for such market with respect to perform7 ance in such year. 

8 (5) METHODOLOGY FOR CALCULATING AVER9 AGE PER CAPITA PREMIUMS.— 

10 (A) ESTABLISHMENT.—The Secretary 

11 shall establish, by rule and consistent with this 

12 subsection, a methodology for computing the 

13 average per capita premiums for health insur14 ance coverage for the small group market and 

15 for the individual market in each State for each 

16 year beginning with year 1. 

17 (B) ADJUSTMENTS.—Under such method18 ology, the Secretary shall provide for the fol19 lowing adjustments (in a manner determined 

20 appropriate by the Secretary): 

21 (i) EXCLUSION OF ILLEGAL ALIENS.— 

22 An adjustment so as not to take into ac23 count enrollees who are not lawfully 

24 present in the United States and their pre25 mium costs. 


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1 (ii) TREATING STATE PREMIUM SUB2 SIDIES AS PREMIUM COSTS.—An adjust3 ment so as to increase per capita pre4 miums to remove the impact of premium 

5 subsidies made directly by a State to re6 duce health insurance premiums. 

7 (6) CONDITIONS OF PAYMENT.—As a condition 

8 of receiving a payment under paragraph (1), a State 

9 must agree to submit aggregate, non-individually 

10 identifiable data to the Secretary, in a form and 

11 manner specified by the Secretary, for use by the 

12 Secretary to determine the State’s premium baseline 

13 and premium performance level for purposes of this 

14 subsection. 

15 (b) PROGRAMS THAT REDUCE THE NUMBER OF UN16 INSURED.— 

17 (1) IN GENERAL.—If the Secretary determines 

18 that a State has reduced the percentage of unin19 sured nonelderly residents in year 5, year 7, or year 

20 9, below the uninsured baseline (as defined in para21 graph (2)) for the State for the year, the Secretary 

22 shall pay the State an amount equal to the product 

23 of— 


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1 (A) bonus uninsured percentage (as de2 fined in paragraph (3)) for the State and year; 

3 and 

4 (B) the maximum uninsured payment 

5 amount (as defined in paragraph (4)) for the 

6 State and year. 

7 (2) UNINSURED BASELINE.— 

8 (A) IN GENERAL.—For purposes of this 

9 subsection, and subject to subparagraph (B), 

10 the term ‘‘uninsured baseline’’ means, for a 

11 State, the percentage of nonelderly residents in 

12 the State who are uninsured in year 1. 

13 (B) ADJUSTMENT.—The Secretary may, at 

14 the written request of a State, adjust the unin15 sured baseline for States for a year to take into 

16 account unanticipated and exceptional changes, 

17 such as an unanticipated migration, of non18 elderly individuals into, or out of, States in a 

19 manner that does not reflect substantially the 

20 proportion of uninsured nonelderly residents in 

21 the States involved in year 1. Any such adjust22 ment shall only be done in a manner that does 

23 not result in the average of the uninsured base24 lines for nonelderly residents for all States 

25 being changed. 


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1 (3) BONUS UNINSURED PERCENTAGE.— 

2 (A) BONUS UNINSURED PERCENTAGE.— 

3 For purposes of this subsection, the term 

4 ‘‘bonus uninsured percentage’’ means, for a 

5 State for a year, such percentage as determined 

6 in accordance with the following table, based on 

7 the uninsured performance level (as defined in 

8 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%. 

9 (B) UNINSURED PERFORMANCE LEVEL.— 

10 For purposes of this subsection, the term ‘‘un11 insured performance level’’ means, for a State 

12 for a year, the reduction (expressed as a per13 centage) in the percentage of uninsured non14 elderly residents in such State in the year as 

15 compared to the uninsured baseline for such 

16 State for such year. 


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1 (4) MAXIMUM STATE UNINSURED PAYMENT

2 AMOUNT DEFINED.—For purposes of this sub3 section, the term ‘‘maximum State uninsured pay4 ment amount’’ means, for a State for a year, the 

5 product of— 

6 (A) the proportion (as determined by the 

7 Secretary), of the number of uninsured non8 elderly individuals lawfully residing in all the 

9 States in the year, who are residents of the 

10 State; and 

11 (B) the amount available for obligation 

12 under this subsection from amounts appro13 priated under subsection (d) with respect to 

14 performance in such year. 

15 (5) METHODOLOGY FOR COMPUTING THE PER16 CENTAGE OF UNINSURED NONELDERLY RESIDENTS

17 IN A STATE.— 

18 (A) ESTABLISHMENT.—The Secretary 

19 shall establish, by rule and consistent with this 

20 subsection, a methodology for computing the 

21 percentage of nonelderly residents in a State 

22 who are uninsured in each year beginning with 

23 year 1. 

24 (B) RULES.— 


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1 (i) TREATMENT OF UNINSURED.— 

2 Such methodology shall treat as uninsured 

3 those residents who do not have health in4 surance coverage or other creditable cov5 erage (as defined in section 9801(c)(1) of 

6 the Internal Revenue Code of 1986), ex7 cept that such methodology shall rely upon 

8 data on the nonelderly and uninsured pop9 ulations within each State in such year 

10 provided through population surveys con11 ducted by Federal agencies. 

12 (ii) LIMITATION TO NONELDERLY.— 

13 Such methodology shall exclude individuals 

14 who are 65 years of age or older. 

15 (iii) EXCLUSION OF ILLEGAL

16 ALIENS.—Such methodology shall exclude 

17 individuals not lawfully present in the 

18 United States. 

19 (6) CONDITIONS OF PAYMENT.—As a condition 

20 of receiving a payment under paragraph (1), a State 

21 must agree to submit aggregate, non-individually 

22 identifiable data to the Secretary, in a form and 

23 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. 112. 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 Web site (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 00:55 Jan 26, 2011 Jkt 099200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\H397.IH H397

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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 Web site link directing the enrollee from the 

24 finder to the health insurance plan Web site, 

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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. 113. 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, 2011, in a manner ensuring 

22 that such rules are effective not later than 

23 January 1, 2013, 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 2012, in a manner ensuring that such 

8 rules are effective not later than January 

9 1, 2014. 

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, 2014, in a manner 

20 ensuring that such rules are effective not 

21 later than January 1, 2016. 

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, 2013, 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, 2015, 

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, 2014, 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 2014, 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 2014, 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, 2014, 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 December 1, 2015, and annually thereafter, the Sec16 retary shall provide the Secretary of the Treasury 

17 with a report identifying those health plans that 

18 have been assessed a penalty fee under this sub19 section. 

20 ‘‘(4) COLLECTION OF PENALTY FEE.— 

21 ‘‘(A) IN GENERAL.—The Secretary of the 

22 Treasury, acting through the Financial Man23 agement Service, shall administer the collection 

24 of penalty fees from health plans that have been 


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1 identified by the Secretary in the penalty fee re2 port provided under paragraph (3). 

3 ‘‘(B) NOTICE.—Not later than August 1, 

4 2014, and annually thereafter, the Secretary of 

5 the Treasury shall provide notice to each health 

6 plan that has been assessed a penalty fee by the 

7 Secretary under this subsection. Such notice 

8 shall include the amount of the penalty fee as9 sessed by the Secretary and the due date for 

10 payment of such fee to the Secretary of the 

11 Treasury (as described in subparagraph (C)). 

12 ‘‘(C) PAYMENT DUE DATE.—Payment by a 

13 health plan for a penalty fee assessed under 

14 this subsection shall be made to the Secretary 

15 of the Treasury not later than November 1, 

16 2014, and annually thereafter. 

17 ‘‘(D) UNPAID PENALTY FEES.—Any 

18 amount of a penalty fee assessed against a 

19 health plan under this subsection for which pay20 ment has not been made by the due date pro21 vided under subparagraph (C) shall be— 

22 ‘‘(i) increased by the interest accrued 

23 on such amount, as determined pursuant 

24 to the underpayment rate established 


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1 under section 6601 of the Internal Rev2 enue Code of 1986; and 

3 ‘‘(ii) treated as a past-due, legally en4 forceable debt owed to a Federal agency 

5 for purposes of section 6402(d) of the In6 ternal Revenue Code of 1986. 

7 ‘‘(E) ADMINISTRATIVE FEES.—Any fee 

8 charged or allocated for collection activities con9 ducted by the Financial Management Service 

10 will be passed on to a health plan on a pro-rata 

11 basis and added to any penalty fee collected 

12 from the plan.’’. 

13 (b) PROMULGATION OF RULES.— 

14 (1) UNIQUE HEALTH PLAN IDENTIFIER.—The 

15 Secretary shall promulgate a final rule to establish 

16 a unique health plan identifier (as described in sec17 tion 1173(b) of the Social Security Act (42 U.S.C. 

18 1320d–2(b))) based on the input of the National 

19 Committee of Vital and Health Statistics. The Sec20 retary may do so on an interim final basis and such 

21 rule shall be effective not later than October 1, 

22 2012. 

23 (2) ELECTRONIC FUNDS TRANSFER.—The Sec24 retary shall promulgate a final rule to establish a 

25 standard for electronic funds transfers (as described 


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1 in section 1173(a)(2)(J) of the Social Security Act, 

2 as added by subsection (a)(2)(A)). The Secretary 

3 may do so on an interim final basis and shall adopt 

4 such standard not later than January 1, 2012, in a 

5 manner ensuring that such standard is effective not 

6 later than January 1, 2014. 

7 (c) EXPANSION OF ELECTRONIC TRANSACTIONS IN

8 MEDICARE.—Section 1862(a) of the Social Security Act 

9 (42 U.S.C. 1395y(a)) is amended— 

10 (1) in paragraph (23), by striking the ‘‘or’’ at 

11 the end; 

12 (2) in paragraph (24), by striking the period 

13 and inserting ‘‘; or’’; and 

14 (3) by inserting after paragraph (24) the fol15 lowing new paragraph: 

16 ‘‘(25) not later than January 1, 2014, for 

17 which the payment is other than by electronic funds 

18 transfer (EFT) or an electronic remittance in a form 

19 as specified in ASC X12 835 Health Care Payment 

20 and Remittance Advice or subsequent standard.’’. 

21 (d) MEDICARE AND MEDICAID COMPLIANCE RE22 PORTS.—Not later than July 1, 2013, the Secretary of 

23 Health and Human Services shall submit a report to the 

24 chairs and ranking members of the Committee on Ways 

25 and Means and the Committee on Energy and Commerce 


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1 of the House of Representatives and the chairs and rank2 ing members of the Committee on Health, Education, 

3 Labor, and Pensions and the Committee on Finance of 

4 the Senate on the extent to which the Medicare program 

5 and providers that serve beneficiaries under that program, 

6 and State Medicaid programs and providers that serve 

7 beneficiaries under those programs, transact electronically 

8 in accordance with transaction standards issued under the 

9 Health Insurance Portability and Accountability Act of 

10 1996, part C of title XI of the Social Security Act, and 

11 regulations promulgated under such Acts. 

12 DIVISION B—IMPROVING 

13 ACCESS TO HEALTH CARE 

14 TITLE I—EXPANDING ACCESS 

15 AND LOWERING COSTS FOR 

16 SMALL BUSINESSES 

17 SEC. 201. RULES GOVERNING ASSOCIATION HEALTH 

18 PLANS. 

19 (a) IN GENERAL.—Subtitle B of title I of the Em20 ployee Retirement Income Security Act of 1974 is amend21 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 00:55 Jan 26, 2011 Jkt 099200 PO 00000 Frm 00055 Fmt 6652 Sfmt 6201 E:\BILLS\H397.IH H397

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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 00:55 Jan 26, 2011 Jkt 099200 PO 00000 Frm 00057 Fmt 6652 Sfmt 6201 E:\BILLS\H397.IH H397

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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 00:55 Jan 26, 2011 Jkt 099200 PO 00000 Frm 00084 Fmt 6652 Sfmt 6201 E:\BILLS\H397.IH H397

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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, 2012, 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. 202. 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 

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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. 203. 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. 204. 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. 205. EFFECTIVE DATE AND TRANSITIONAL AND 

14 OTHER RULES. 

15 (a) EFFECTIVE DATE.—The amendments made by 

16 this title shall take effect 1 year after the date of the en17 actment of this Act. The Secretary of Labor shall first 

18 issue all regulations necessary to carry out the amend19 ments made by this title within 1 year after the date of 

20 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 subtitle)) 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 TITLE II—TARGETED EFFORTS 

4 TO EXPAND ACCESS 

5 SEC. 211. 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 25 

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 through plan year that includes 

25th birthday.’’. 

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 25 

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.’’. 


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1 (c) IRC.— 

2 (1) IN GENERAL.—Subchapter B of chapter 

3 100 of the Internal Revenue Code of 1986 is amend4 ed by adding at the end the following new section: 

5 ‘‘SEC. 9814. EXTENDING COVERAGE OF DEPENDENTS. 

6 ‘‘(a) IN GENERAL.—In the case of a group health 

7 plan that treats as a beneficiary under the plan an indi8 vidual who is a dependent child of a participant or bene9 ficiary under the plan, the plan shall continue to treat the 

10 individual as a dependent child without regard to the indi11 vidual’s age through at least the end of the plan year in 

12 which the individual turns an age specified in the plan, 

13 but not less than 25 years of age. 

14 ‘‘(b) CONSTRUCTION.—Nothing in this section shall 

15 be construed as requiring a group health plan to provide 

16 coverage for dependent children as beneficiaries under the 

17 plan or to require a participant to elect coverage of de18 pendent children.’’. 

19 (2) CLERICAL AMENDMENT.—The table of sec20 tions in such subchapter is amended by adding at 

21 the end the following new item: 

‘‘Sec. 9814. Extending coverage of dependents through plan year that includes 

25th birthday.’’. 

22 (d) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to group health plans for each plan 

24 year beginning more than 3 months after the date of the 


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1 enactment of this Act and shall apply to individuals who 

2 are dependent children under a group health plan, or 

3 health insurance coverage offered in connection with such 

4 a plan, on or after such date. 

5 SEC. 212. ALLOWING AUTO-ENROLLMENT FOR EMPLOYER 

6 SPONSORED COVERAGE. 

7 (a) IN GENERAL.—No State shall establish a law 

8 that prevents an employer from instituting auto-enroll9 ment for coverage of a participant or beneficiary, including 

10 current employees, under a group health plan, or health 

11 insurance coverage offered in connection with such a plan, 

12 so long as the participant or beneficiary has the option 

13 of declining such coverage. 

14 (b) AUTO-ENROLLMENT.— 

15 (1) NOTICE REQUIRED.—Employers with auto16 enrollment under a group health plan or health in17 surance coverage shall provide annual notification, 

18 within a reasonable period before the beginning of 

19 each plan year, to each employee eligible to partici20 pate in the plan. The notice shall explain the em21 ployee contribution to such plan and the employee’s 

22 right to decline coverage. 

23 (2) TREATMENT OF NON-ACTION.—After a rea24 sonable period of time after receipt of the notice, if 

25 an employee fails to make an affirmative declaration 


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1 declining coverage, then such an employee may be 

2 enrolled in the group health plan or health insurance 

3 coverage offered in connection with such a plan.’’ 

4 (c) CONSTRUCTION.—Nothing in this section shall be 

5 construed to supersede State law which establishes, imple6 ments, or continues in effect any standard or requirement 

7 relating to employers in connection with payroll or the 

8 sponsoring of employer sponsored health insurance cov9 erage except to the extent that such standard or require10 ment prevents an employer from instituting the auto-en11 rollment described in subsection (a). 

12 TITLE III—EXPANDING CHOICES 

13 BY ALLOWING AMERICANS TO 

14 BUY HEALTH CARE COV15 ERAGE ACROSS STATE LINES 

16 SEC. 221. INTERSTATE PURCHASING OF HEALTH INSUR17 ANCE. 

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

19 Service Act (42 U.S.C. 300gg et seq.) is amended by add20 ing at the end the following new part: 

21 ‘‘PART D—COOPERATIVE GOVERNING OF 

22 INDIVIDUAL HEALTH INSURANCE COVERAGE 

23 ‘‘SEC. 2795. DEFINITIONS. 

24 ‘‘In this part: 


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

2 State’ means, with respect to individual health insur3 ance coverage offered by a health insurance issuer, 

4 the State designated by the issuer as the State 

5 whose covered laws shall govern the health insurance 

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

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

8 only designate one such State as its primary State 

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

10 issuer may not change the designated primary State 

11 with respect to individual health insurance coverage 

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

13 may be made upon renewal of the policy. With re14 spect to such designated State, the issuer is deemed 

15 to be doing business in that State. 

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

17 State’ means, with respect to individual health insur18 ance coverage offered by a health insurance issuer, 

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

20 of a health insurance issuer that is selling a policy 

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

22 is deemed to be doing business in that secondary 

23 State. 

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

25 ‘health insurance issuer’ has the meaning given such 


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

2 issuer must be licensed in the primary State and be 

3 qualified to sell individual health insurance coverage 

4 in that State. 

5 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV6 ERAGE.—The term ‘individual health insurance cov7 erage’ means health insurance coverage offered in 

8 the individual market, as defined in section 

9 2791(e)(1). 

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

11 term ‘applicable State authority’ means, with respect 

12 to a health insurance issuer in a State, the State in13 surance commissioner or official or officials des14 ignated by the State to enforce the requirements of 

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

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

17 term ‘hazardous financial condition’ means that, 

18 based on its present or reasonably anticipated finan19 cial condition, a health insurance issuer is unlikely 

20 to be able— 

21 ‘‘(A) to meet obligations to policyholders 

22 with respect to known claims and reasonably 

23 anticipated claims; or 

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

25 course of business. 


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1 ‘‘(7) COVERED LAWS.— 

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

3 laws’ means the laws, rules, regulations, agree4 ments, and orders governing the insurance busi5 ness pertaining to— 

6 ‘‘(i) individual health insurance cov7 erage issued by a health insurance issuer; 

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

9 medical underwriting), renewal, and 

10 issuance of individual health insurance cov11 erage to an individual; 

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

13 relation to individual health insurance cov14 erage of health care and insurance related 

15 services; 

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

17 relation to individual health insurance cov18 erage of management, operations, and in19 vestment activities of a health insurance 

20 issuer; and 

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

22 relation to individual health insurance cov23 erage of loss control and claims adminis24 tration for a health insurance issuer with 


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1 respect to liability for which the issuer pro2 vides insurance. 

3 ‘‘(B) EXCEPTION.—Such term does not in4 clude any law, rule, regulation, agreement, or 

5 order governing the use of care or cost manage6 ment techniques, including any requirement re7 lated to provider contracting, network access or 

8 adequacy, health care data collection, or quality 

9 assurance. 

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

11 States and includes the District of Columbia, Puerto 

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

13 and the Northern Mariana Islands. 

14 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC15 TICES.—The term ‘unfair claims settlement prac16 tices’ means only the following practices: 

17 ‘‘(A) Knowingly misrepresenting to claim18 ants and insured individuals relevant facts or 

19 policy provisions relating to coverage at issue. 

20 ‘‘(B) Failing to acknowledge with reason21 able promptness pertinent communications with 

22 respect to claims arising under policies. 

23 ‘‘(C) Failing to adopt and implement rea24 sonable standards for the prompt investigation 

25 and settlement of claims arising under policies. 


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

2 and equitable settlement of claims submitted in 

3 which liability has become reasonably clear. 

4 ‘‘(E) Refusing to pay claims without con5 ducting a reasonable investigation. 

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

7 claims within a reasonable period of time after 

8 having completed an investigation related to 

9 those claims. 

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

11 insured individuals or their beneficiaries to in12 stitute suits to recover amounts due under its 

13 policies by offering substantially less than the 

14 amounts ultimately recovered in suits brought 

15 by them. 

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

17 to settle or settling claims for less than the 

18 amount that a reasonable person would believe 

19 the insured individual or his or her beneficiary 

20 was entitled by reference to written or printed 

21 advertising material accompanying or made 

22 part of an application. 

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

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1 ally altered without notice to, or knowledge or 

2 consent of, the insured. 

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

4 present claims within 15 calendar days of a re5 quests with reasonable explanations regarding 

6 their use. 

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

8 time than that prescribed in the policy or by the 

9 law of the primary State. 

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

11 and abuse’ means an act or omission committed by 

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

13 commits, or conceals any material information con14 cerning, one or more of the following: 

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

16 or preparing with knowledge or belief that it 

17 will be presented to or by an insurer, a rein18 surer, broker or its agent, false information as 

19 part of, in support of or concerning a fact ma20 terial to one or more of the following: 

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

22 renewal of an insurance policy or reinsur23 ance contract. 

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

25 or reinsurance contract. 


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

2 pursuant to an insurance policy or reinsur3 ance contract. 

4 ‘‘(iv) Premiums paid on an insurance 

5 policy or reinsurance contract. 

6 ‘‘(v) Payments made in accordance 

7 with the terms of an insurance policy or 

8 reinsurance contract. 

9 ‘‘(vi) A document filed with the com10 missioner or the chief insurance regulatory 

11 official of another jurisdiction. 

12 ‘‘(vii) The financial condition of an in13 surer or reinsurer. 

14 ‘‘(viii) The formation, acquisition, 

15 merger, reconsolidation, dissolution or 

16 withdrawal from one or more lines of in17 surance or reinsurance in all or part of a 

18 State by an insurer or reinsurer. 

19 ‘‘(ix) The issuance of written evidence 

20 of insurance. 

21 ‘‘(x) The reinstatement of an insur22 ance policy. 

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

24 renewal insurance risks on behalf of an insurer 

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1 ness of insurance by a person who knows or 

2 should know that the insurer or other person 

3 responsible for the risk is insolvent at the time 

4 of the transaction. 

5 ‘‘(C) Transaction of the business of insur6 ance in violation of laws requiring a license, cer7 tificate of authority or other legal authority for 

8 the transaction of the business of insurance. 

9 ‘‘(D) Attempt to commit, aiding or abet10 ting in the commission of, or conspiracy to com11 mit the acts or omissions specified in this para12 graph. 

13 ‘‘SEC. 2796. APPLICATION OF LAW. 

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

15 State shall apply to individual health insurance coverage 

16 offered by a health insurance issuer in the primary State 

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

18 issuer comply with the conditions of this section with re19 spect to the offering of coverage in any secondary State. 

20 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC21 ONDARY STATE.—Except as provided in this section, a 

22 health insurance issuer with respect to its offer, sale, rat23 ing (including medical underwriting), renewal, and 

24 issuance of individual health insurance coverage in any 

25 secondary State is exempt from any covered laws of the 


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

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

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

4 ‘‘(1) make unlawful, or regulate, directly or in5 directly, the operation of the health insurance issuer 

6 operating in the secondary State, except that any 

7 secondary State may require such an issuer— 

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

9 applicable premium and other taxes (including 

10 high risk pool assessments) which are levied on 

11 insurers and surplus lines insurers, brokers, or 

12 policyholders under the laws of the State; 

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

14 State insurance commissioner as its agent solely 

15 for the purpose of receiving service of legal doc16 uments or process; 

17 ‘‘(C) to submit to an examination of its fi18 nancial condition by the State insurance com19 missioner in any State in which the issuer is 

20 doing business to determine the issuer’s finan21 cial condition, if— 

22 ‘‘(i) the State insurance commissioner 

23 of the primary State has not done an ex24 amination within the period recommended 


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1 by the National Association of Insurance 

2 Commissioners; and 

3 ‘‘(ii) any such examination is con4 ducted in accordance with the examiners’ 

5 handbook of the National Association of 

6 Insurance Commissioners and is coordi7 nated to avoid unjustified duplication and 

8 unjustified repetition; 

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

10 issued— 

11 ‘‘(i) in a delinquency proceeding com12 menced by the State insurance commis13 sioner if there has been a finding of finan14 cial impairment under subparagraph (C); 

15 or 

16 ‘‘(ii) in a voluntary dissolution pro17 ceeding; 

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

19 by a court of competent jurisdiction, upon a pe20 tition by the State insurance commissioner al21 leging that the issuer is in hazardous financial 

22 condition; 

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

24 basis, in any insurance insolvency guaranty as25 sociation or similar association to which a 


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1 health insurance issuer in the State is required 

2 to belong; 

3 ‘‘(G) to comply with any State law regard4 ing fraud and abuse (as defined in section 

5 2795(10)), except that if the State seeks an in6 junction regarding the conduct described in this 

7 subparagraph, such injunction must be obtained 

8 from a court of competent jurisdiction; 

9 ‘‘(H) to comply with any State law regard10 ing unfair claims settlement practices (as de11 fined in section 2795(9)); or 

12 ‘‘(I) to comply with the applicable require13 ments for independent review under section 

14 2798 with respect to coverage offered in the 

15 State; 

16 ‘‘(2) require any individual health insurance 

17 coverage issued by the issuer to be countersigned by 

18 an insurance agent or broker residing in that Sec19 ondary State; or 

20 ‘‘(3) otherwise discriminate against the issuer 

21 issuing insurance in both the primary State and in 

22 any secondary State. 

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

24 health insurance issuer shall provide the following notice, 

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


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1 in a secondary State under this part by such a health in2 surance issuer and at renewal of the policy, with the 5 

3 blank spaces therein being appropriately filled with the 

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

5 State, the name of the secondary State, the name of the 

6 secondary State, and the name of the secondary State, re7 spectively, for the coverage concerned: 

8 THIS POLICY IS ISSUED BY lllll AND 

9 IS GOVERNED BY THE LAWS AND REGULA10 TIONS OF THE STATE OF lllll, AND IT 

11 HAS MET ALL THE LAWS OF THAT STATE 

12 AS DETERMINED BY THAT STATE’S DE13 PARTMENT OF INSURANCE. THIS POLICY 

14 MAY BE LESS EXPENSIVE THAN OTHERS 

15 BECAUSE IT IS NOT SUBJECT TO ALL OF 

16 THE INSURANCE LAWS AND REGULATIONS 

17 OF THE STATE OF lllll, INCLUDING 

18 COVERAGE OF SOME SERVICES OR BENE19 FITS MANDATED BY THE LAW OF THE 

20 STATE OF lllll. ADDITIONALLY, THIS 

21 POLICY IS NOT SUBJECT TO ALL OF THE 

22 CONSUMER PROTECTION LAWS OR RE23 STRICTIONS ON RATE CHANGES OF THE 

24 STATE OF lllll. AS WITH ALL INSUR25 ANCE PRODUCTS, BEFORE PURCHASING 


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1 THIS POLICY, YOU SHOULD CAREFULLY 

2 REVIEW THE POLICY AND DETERMINE 

3 WHAT HEALTH CARE SERVICES THE POL4 ICY COVERS AND WHAT BENEFITS IT PRO5 VIDES, INCLUDING ANY EXCLUSIONS, LIM6 ITATIONS, OR CONDITIONS FOR SUCH 

7 SERVICES OR BENEFITS.’’. 

8 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

9 AND PREMIUM INCREASES.— 

10 ‘‘(1) IN GENERAL.—For purposes of this sec11 tion, a health insurance issuer that provides indi12 vidual health insurance coverage to an individual 

13 under this part in a primary or secondary State may 

14 not upon renewal— 

15 ‘‘(A) move or reclassify the individual in16 sured under the health insurance coverage from 

17 the class such individual is in at the time of 

18 issue of the contract based on the health-status 

19 related factors of the individual; or 

20 ‘‘(B) increase the premiums assessed the 

21 individual for such coverage based on a health 

22 status-related factor or change of a health sta23 tus-related factor or the past or prospective 

24 claim experience of the insured individual. 


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

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

3 issuer— 

4 ‘‘(A) from terminating or discontinuing 

5 coverage or a class of coverage in accordance 

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

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

8 policy holders within a class based on claims ex9 perience; 

10 ‘‘(C) from changing premiums or offering 

11 discounted premiums to individuals who engage 

12 in wellness activities at intervals prescribed by 

13 the issuer, if such premium changes or incen14 tives— 

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

16 the insurance contract; 

17 ‘‘(ii) are based on specific wellness ac18 tivities that are not applicable to all indi19 viduals; and 

20 ‘‘(iii) are not obtainable by all individ21 uals to whom coverage is offered; 

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

23 ‘‘(E) from retroactively adjusting the rates 

24 charged an insured individual if the initial rates 


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1 were set based on material misrepresentation by 

2 the individual at the time of issue. 

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

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

5 individual health insurance coverage in a secondary State 

6 unless that coverage is currently offered for sale in the 

7 primary State. 

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

9 HEALTH INSURANCE ISSUERS.—Any State may require 

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

11 broker for a health insurance issuer with respect to the 

12 offering of individual health insurance coverage obtain a 

13 license from that State, with commissions or other com14 pensation subject to the provisions of the laws of that 

15 State, except that a State may not impose any qualifica16 tion or requirement which discriminates against a non17 resident agent or broker. 

18 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN19 SURANCE COMMISSIONER.—Each health insurance issuer 

20 issuing individual health insurance coverage in both pri21 mary and secondary States shall submit— 

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

23 State in which it intends to offer such coverage, be24 fore it may offer individual health insurance cov25 erage in such State— 


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1 ‘‘(A) a copy of the plan of operation or fea2 sibility study or any similar statement of the 

3 policy being offered and its coverage (which 

4 shall include the name of its primary State and 

5 its principal place of business); 

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

7 designation of its primary State; and 

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

9 issuer’s compliance with all the laws of the pri10 mary State; and 

11 ‘‘(2) to the insurance commissioner of each sec12 ondary State in which it offers individual health in13 surance coverage, a copy of the issuer’s quarterly fi14 nancial statement submitted to the primary State, 

15 which statement shall be certified by an independent 

16 public accountant and contain a statement of opin17 ion on loss and loss adjustment expense reserves 

18 made by— 

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

20 of Actuaries; or 

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

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

23 Nothing in this section shall be construed to affect the 

24 authority of any Federal or State court to enjoin— 


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

2 insurance coverage by a health insurance issuer to 

3 any person or group who is not eligible for such in4 surance; or 

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

6 insurance coverage that violates the requirements of 

7 the law of a secondary State which are described in 

8 subparagraphs (A) through (H) of section 

9 2796(b)(1). 

10 ‘‘(i) POWER OF SECONDARY STATES TO TAKE AD11 MINISTRATIVE ACTION.—Nothing in this section shall be 

12 construed to affect the authority of any State to enjoin 

13 conduct in violation of that State’s laws described in sec14 tion 2796(b)(1). 

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

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

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

18 paragraph (2), nothing in this section shall be con19 strued to affect the authority of any State to make 

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

21 State with respect to which a health insurance issuer 

22 is not exempt under subsection (b). 

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

24 If a State seeks an injunction regarding the conduct 

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


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1 (h), such injunction must be obtained from a Fed2 eral or State court of competent jurisdiction. 

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

4 section shall affect the authority of any State to bring ac5 tion in any Federal or State court. 

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

7 this section shall be construed to affect the applicability 

8 of State laws generally applicable to persons or corpora9 tions. 

10 ‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO

11 HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 

12 health insurance issuer is offering coverage in a primary 

13 State that does not accommodate residents of secondary 

14 States or does not provide a working mechanism for resi15 dents of a secondary State, and the issuer is offering cov16 erage under this part in such secondary State which has 

17 not adopted a qualified high risk pool as its acceptable 

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

19 the issuer shall, with respect to any individual health in20 surance coverage offered in a secondary State under this 

21 part, comply with the guaranteed availability requirements 

22 for eligible individuals in section 2741. 


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

2 BEFORE ISSUER MAY SELL INTO SECONDARY 

3 STATES. 

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

5 issue individual health insurance coverage in a secondary 

6 State if the State insurance commissioner does not use 

7 a risk-based capital formula for the determination of cap8 ital and surplus requirements for all health insurance 

9 issuers. 

10 ‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE11 DURES. 

12 ‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur13 ance issuer may not offer, sell, or issue individual health 

14 insurance coverage in a secondary State under the provi15 sions of this title unless— 

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

17 State have legislation or regulations in place estab18 lishing an independent review process for individuals 

19 who are covered by individual health insurance cov20 erage, or 

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

22 subparagraph (A) are not met with respect to the ei23 ther of such States, the issuer provides an inde24 pendent review mechanism substantially identical (as 

25 determined by the applicable State authority of such 

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1 ternal Review Model Act’ of the National Association 

2 of Insurance Commissioners for all individuals who 

3 purchase insurance coverage under the terms of this 

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

5 is conducted by an independent medical reviewer, or 

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

7 requirements of subsection (b) are met. 

8 ‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL

9 REVIEWERS.—In the case of any independent review 

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

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

12 claim to an independent medical reviewer, or to any 

13 panel of such reviewers, to conduct independent 

14 medical review, the issuer shall ensure that— 

15 ‘‘(A) each independent medical reviewer 

16 meets the qualifications described in paragraphs 

17 (2) and (3); 

18 ‘‘(B) with respect to each review, each re19 viewer meets the requirements of paragraph (4) 

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

21 panel, meets the requirements described in 

22 paragraph (5); and 

23 ‘‘(C) compensation provided by the issuer 

24 to each reviewer is consistent with paragraph 

25 (6). 


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1 ‘‘(2) LICENSURE AND EXPERTISE.—Each inde2 pendent medical reviewer shall be a physician 

3 (allopathic or osteopathic) or health care profes4 sional who— 

5 ‘‘(A) is appropriately credentialed or li6 censed in 1 or more States to deliver health 

7 care services; and 

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

9 the diagnosis, or provides the type of treatment 

10 under review. 

11 ‘‘(3) INDEPENDENCE.— 

12 ‘‘(A) IN GENERAL.—Subject to subpara13 graph (B), each independent medical reviewer 

14 in a case shall— 

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

16 in paragraph (7)); 

17 ‘‘(ii) not have a material familial, fi18 nancial, or professional relationship with 

19 such a party; and 

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

21 interest with such a party (as determined 

22 under regulations). 

23 ‘‘(B) EXCEPTION.—Nothing in subpara24 graph (A) shall be construed to— 


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

2 the basis of affiliation with the issuer, 

3 from serving as an independent medical re4 viewer if— 

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

6 not reasonably available; 

7 ‘‘(II) the affiliated individual is 

8 not involved in the provision of items 

9 or services in the case under review; 

10 ‘‘(III) the fact of such an affili11 ation is disclosed to the issuer and the 

12 enrollee (or authorized representative) 

13 and neither party objects; and 

14 ‘‘(IV) the affiliated individual is 

15 not an employee of the issuer and 

16 does not provide services exclusively or 

17 primarily to or on behalf of the issuer; 

18 ‘‘(ii) prohibit an individual who has 

19 staff privileges at the institution where the 

20 treatment involved takes place from serv21 ing as an independent medical reviewer 

22 merely on the basis of such affiliation if 

23 the affiliation is disclosed to the issuer and 

24 the enrollee (or authorized representative), 

25 and neither party objects; or 


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1 ‘‘(iii) prohibit receipt of compensation 

2 by an independent medical reviewer from 

3 an entity if the compensation is provided 

4 consistent with paragraph (6). 

5 ‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL

6 IN SAME FIELD.— 

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

8 treatment, or the provision of items or serv9 ices— 

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

11 a practicing physician (allopathic or osteo12 pathic) of the same or similar specialty, as 

13 a physician who, acting within the appro14 priate scope of practice within the State in 

15 which the service is provided or rendered, 

16 typically treats the condition, makes the 

17 diagnosis, or provides the type of treat18 ment under review; or 

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

20 professional, the reviewer, or at least 1 

21 member of the review panel, shall be a 

22 practicing non-physician health care pro23 fessional of the same or similar specialty 

24 as the non-physician health care profes25 sional who, acting within the appropriate 


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1 scope of practice within the State in which 

2 the service is provided or rendered, typi3 cally treats the condition, makes the diag4 nosis, or provides the type of treatment 

5 under review. 

6 ‘‘(B) PRACTICING DEFINED.—For pur7 poses of this paragraph, the term ‘practicing’ 

8 means, with respect to an individual who is a 

9 physician or other health care professional, that 

10 the individual provides health care services to 

11 individual patients on average at least 2 days 

12 per week. 

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

14 external review relating to a child, a reviewer shall 

15 have expertise under paragraph (2) in pediatrics. 

16 ‘‘(6) LIMITATIONS ON REVIEWER COMPENSA17 TION.—Compensation provided by the issuer to an 

18 independent medical reviewer in connection with a 

19 review under this section shall— 

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

21 ‘‘(B) not be contingent on the decision ren22 dered by the reviewer. 

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

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


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1 respect to a denial of a claim under a coverage relat2 ing to an enrollee, any of the following: 

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

4 officer, director, or employee of the issuer. 

5 ‘‘(B) The enrollee (or authorized represent6 ative). 

7 ‘‘(C) The health care professional that pro8 vides the items or services involved in the de9 nial. 

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

11 services (or treatment) involved in the denial 

12 are provided. 

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

14 other item that is included in the items or serv15 ices involved in the denial. 

16 ‘‘(F) Any other party determined under 

17 any regulations to have a substantial interest in 

18 the denial involved. 

19 ‘‘(8) DEFINITIONS.—For purposes of this sub20 section: 

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

22 means, with respect to health insurance cov23 erage offered by a health insurance issuer, an 

24 individual enrolled with the issuer to receive 

25 such coverage. 


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

2 term ‘health care professional’ means an indi3 vidual who is licensed, accredited, or certified 

4 under State law to provide specified health care 

5 services and who is operating within the scope 

6 of such licensure, accreditation, or certification. 

7 ‘‘SEC. 2799. ENFORCEMENT. 

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

9 respect to specific individual health insurance coverage the 

10 primary State for such coverage has sole jurisdiction to 

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

12 State and any secondary State. 

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

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

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

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

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

18 initiated by the applicable secondary State authority, the 

19 court of competent jurisdiction shall apply the covered 

20 laws of the primary State. 

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

22 of individual health insurance coverage offered in a sec23 ondary State that fails to comply with the covered laws 

24 of the primary State, the applicable State authority of the 


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1 secondary State may notify the applicable State authority 

2 of the primary State.’’. 

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

4 subsection (a) shall apply to individual health insurance 

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

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

7 (c) GAO ONGOING STUDY AND REPORTS.— 

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

9 United States shall conduct an ongoing study con10 cerning the effect of the amendment made by sub11 section (a) on— 

12 (A) the number of uninsured and under-in13 sured; 

14 (B) the availability and cost of health in15 surance policies for individuals with preexisting 

16 medical conditions; 

17 (C) the availability and cost of health in18 surance policies generally; 

19 (D) the elimination or reduction of dif20 ferent types of benefits under health insurance 

21 policies offered in different States; and 

22 (E) cases of fraud or abuse relating to 

23 health insurance coverage offered under such 

24 amendment and the resolution of such cases. 


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1 (2) ANNUAL REPORTS.—The Comptroller Gen2 eral shall submit to Congress an annual report, after 

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

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

5 the ongoing study conducted under paragraph (1). 

6 TITLE IV—IMPROVING HEALTH 

7 SAVINGS ACCOUNTS 

8 SEC. 231. SAVER’S CREDIT FOR CONTRIBUTIONS TO 

9 HEALTH SAVINGS ACCOUNTS. 

10 (a) ALLOWANCE OF CREDIT.—Subsection (a) of sec11 tion 25B of the Internal Revenue Code of 1986 is amend12 ed by inserting ‘‘aggregate qualified HSA contributions 

13 and’’ after ‘‘so much of the’’. 

14 (b) QUALIFIED HSA CONTRIBUTIONS.—Subsection 

15 (d) of section 25B of such Code is amended by redesig16 nating paragraph (2) as paragraph (3) and by inserting 

17 after paragraph (1) the following new paragraph: 

18 ‘‘(2) QUALIFIED HSA CONTRIBUTIONS.—The 

19 term ‘qualified HSA contribution’ means, with re20 spect to any taxable year, a contribution of the eligi21 ble individual to a health savings account (as defined 

22 in section 223(d)(1)) for which a deduction is allow23 able under section 223(a) for such taxable year.’’. 

24 (c) CONFORMING AMENDMENT.—The first sentence 

25 of section 25B(d)(3)(A) of such Code (as redesignated by 


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1 subsection (b)) is amended to read as follows: ‘‘The aggre2 gate qualified retirement savings contributions determined 

3 under paragraph (1) and qualified HSA contributions de4 termined under paragraph (2) shall be reduced (but not 

5 below zero) by the aggregate distributions received by the 

6 individual during the testing period from any entity of a 

7 type to which contributions under paragraph (1) or para8 graph (2) (as the case may be) may be made.’’. 

9 (d) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to contributions made after De11 cember 31, 2011. 

12 SEC. 232. HSA FUNDS FOR PREMIUMS FOR HIGH DEDUCT13 IBLE HEALTH PLANS. 

14 (a) IN GENERAL.—Subparagraph (C) of section 

15 223(d)(2) of the Internal Revenue Code of 1986 is amend16 ed by striking ‘‘or’’ at the end of clause (iii), by striking 

17 the period at the end of clause (iv) and inserting ‘‘, or’’, 

18 and by adding at the end the following: 

19 ‘‘(v) a high deductible health plan if— 

20 ‘‘(I) such plan is not offered in 

21 connection with a group health plan, 

22 ‘‘(II) no portion of any premium 

23 (within the meaning of applicable pre24 mium under section 4980B(f)(4)) for 


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1 such plan is excludable from gross in2 come under section 106, and 

3 ‘‘(III) the account beneficiary 

4 demonstrates, using procedures 

5 deemed appropriate by the Secretary, 

6 that after payment of the premium 

7 for such insurance the balance in the 

8 health savings account is at least 

9 twice the minimum deductible in ef10 fect under subsection (c)(2)(A)(i) 

11 which is applicable to such plan.’’. 

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

13 subsection (a) shall apply to premiums for a high deduct14 ible health plan for periods beginning after December 31, 

15 2011. 

16 SEC. 233. REQUIRING GREATER COORDINATION BETWEEN 

17 HDHP ADMINISTRATORS AND HSA ACCOUNT 

18 ADMINISTRATORS SO THAT ENROLLEES CAN 

19 ENROLL IN BOTH AT THE SAME TIME. 

20 The Secretary of the Treasury, through the issuance 

21 of regulations or other guidance, shall encourage adminis22 trators of health plans and trustees of health savings ac23 counts to provide for simultaneous enrollment in high de24 ductible health plans and setup of health savings accounts. 


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1 SEC. 234. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 

2 INCURRED BEFORE ESTABLISHMENT OF AC3 COUNT. 

4 (a) IN GENERAL.—Subsection (d) of section 223 of 

5 the Internal Revenue Code of 1986 is amended by redesig6 nating paragraph (4) as paragraph (5) and by inserting 

7 after paragraph (3) the following new paragraph: 

8 ‘‘(4) CERTAIN MEDICAL EXPENSES INCURRED

9 BEFORE ESTABLISHMENT OF ACCOUNT TREATED AS

10 QUALIFIED.— 

11 ‘‘(A) IN GENERAL.—For purposes of para12 graph (2), an expense shall not fail to be treat13 ed as a qualified medical expense solely because 

14 such expense was incurred before the establish15 ment of the health savings account if such ex16 pense was incurred during the 60-day period 

17 beginning on the date on which the high de18 ductible health plan is first effective. 

19 ‘‘(B) SPECIAL RULES.—For purposes of 

20 subparagraph (A)— 

21 ‘‘(i) an individual shall be treated as 

22 an eligible individual for any portion of a 

23 month for which the individual is described 

24 in subsection (c)(1), determined without 

25 regard to whether the individual is covered 


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1 under a high deductible health plan on the 

2 1st day of such month, and 

3 ‘‘(ii) the effective date of the health 

4 savings account is deemed to be the date 

5 on which the high deductible health plan is 

6 first effective after the date of the enact7 ment of this paragraph.’’. 

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

9 this section shall apply with respect to insurance pur10 chased after the date of the enactment of this Act in tax11 able years beginning after such date. 

12 DIVISION C—ENACTING REAL 

13 MEDICAL LIABILITY REFORM 

14 SEC. 301. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS. 

15 The time for the commencement of a health care law16 suit shall be 3 years after the date of manifestation of 

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

18 the use of reasonable diligence should have discovered, the 

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

20 for commencement of a health care lawsuit exceed 3 years 

21 after the date of manifestation of injury unless tolled for 

22 any of the following— 

23 (1) upon proof of fraud; 

24 (2) intentional concealment; or 


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

2 therapeutic or diagnostic purpose or effect, in the 

3 person of the injured person. 

4 Actions by a minor shall be commenced within 3 years 

5 from the date of the alleged manifestation of injury except 

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

7 be commenced within 3 years of manifestation of injury 

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

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

10 minors for any period during which a parent or guardian 

11 and a health care provider or health care organization 

12 have committed fraud or collusion in the failure to bring 

13 an action on behalf of the injured minor. 

14 SEC. 302. COMPENSATING PATIENT INJURY. 

15 (a) UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL

16 ECONOMIC LOSSES IN HEALTH CARE LAWSUITS.—In any 

17 health care lawsuit, nothing in this title shall limit a claim18 ant’s recovery of the full amount of the available economic 

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

20 (b) ADDITIONAL NONECONOMIC DAMAGES.—In any 

21 health care lawsuit, the amount of noneconomic damages, 

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

23 the number of parties against whom the action is brought 

24 or the number of separate claims or actions brought with 

25 respect to the same injury. 


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1 (c) NO DISCOUNT OF AWARD FOR NONECONOMIC

2 DAMAGES.—For purposes of applying the limitation in 

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

4 discounted to present value. The jury shall not be in5 formed about the maximum award for noneconomic dam6 ages. An award for noneconomic damages in excess of 

7 $250,000 shall be reduced either before the entry of judg8 ment, or by amendment of the judgment after entry of 

9 judgment, and such reduction shall be made before ac10 counting for any other reduction in damages required by 

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

12 noneconomic damages and the combined awards exceed 

13 $250,000, the future noneconomic damages shall be re14 duced first. 

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

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

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

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

19 damages allocated to such party in direct proportion to 

20 such party’s percentage of responsibility. Whenever a 

21 judgment of liability is rendered as to any party, a sepa22 rate judgment shall be rendered against each such party 

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

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1 tion of responsibility of each party for the claimant’s 

2 harm. 

3 SEC. 303. MAXIMIZING PATIENT RECOVERY. 

4 (a) COURT SUPERVISION OF SHARE OF DAMAGES

5 ACTUALLY PAID TO CLAIMANTS.—In any health care law6 suit, the court shall supervise the arrangements for pay7 ment of damages to protect against conflicts of interest 

8 that may have the effect of reducing the amount of dam9 ages awarded that are actually paid to claimants. In par10 ticular, in any health care lawsuit in which the attorney 

11 for a party claims a financial stake in the outcome by vir12 tue of a contingent fee, the court shall have the power 

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

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

15 claimant based upon the interests of justice and principles 

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

17 for representing all claimants in a health care lawsuit ex18 ceed the following limits: 

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

20 by the claimant(s). 

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

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

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

24 recovered by the claimant(s). 


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

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

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

4 shall apply whether the recovery is by judgment, settle5 ment, mediation, arbitration, or any other form of alter6 native dispute resolution. In a health care lawsuit involv7 ing a minor or incompetent person, a court retains the 

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

9 the maximum permitted under this section. The require10 ment for court supervision in the first two sentences of 

11 subsection (a) applies only in civil actions. 

12 SEC. 304. ADDITIONAL HEALTH BENEFITS. 

13 In any health care lawsuit involving injury or wrong14 ful death, any party may introduce evidence of collateral 

15 source benefits. If a party elects to introduce such evi16 dence, any opposing party may introduce evidence of any 

17 amount paid or contributed or reasonably likely to be paid 

18 or contributed in the future by or on behalf of the oppos19 ing party to secure the right to such collateral source bene20 fits. No provider of collateral source benefits shall recover 

21 any amount against the claimant or receive any lien or 

22 credit against the claimant’s recovery or be equitably or 

23 legally subrogated to the right of the claimant in a health 

24 care lawsuit involving injury or wrongful death. This sec25 tion shall apply to any health care lawsuit that is settled 


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1 as well as a health care lawsuit that is resolved by a fact 

2 finder. This section shall not apply to section 1862(b) (42 

3 U.S.C. 1395y(b)) or section 1902(a)(25) (42 U.S.C. 

4 1396a(a)(25)) of the Social Security Act. 

5 SEC. 305. PUNITIVE DAMAGES. 

6 (a) IN GENERAL.—Punitive damages may, if other7 wise permitted by applicable State or Federal law, be 

8 awarded against any person in a health care lawsuit only 

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

10 person acted with malicious intent to injure the claimant, 

11 or that such person deliberately failed to avoid unneces12 sary injury that such person knew the claimant was sub13 stantially certain to suffer. In any health care lawsuit 

14 where no judgment for compensatory damages is rendered 

15 against such person, no punitive damages may be awarded 

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

17 punitive damages shall be included in a health care lawsuit 

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

19 amended pleading for punitive damages only upon a mo20 tion by the claimant and after a finding by the court, upon 

21 review of supporting and opposing affidavits or after a 

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

23 established by a substantial probability that the claimant 

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1 quest of any party in a health care lawsuit, the trier of 

2 fact shall consider in a separate proceeding— 

3 (1) whether punitive damages are to be award4 ed and the amount of such award; and 

5 (2) the amount of punitive damages following a 

6 determination of punitive liability. 

7 If a separate proceeding is requested, evidence relevant 

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

9 applicable State law, shall be inadmissible in any pro10 ceeding to determine whether compensatory damages are 

11 to be awarded. 

12 (b) DETERMINING AMOUNT OF PUNITIVE DAM13 AGES.— 

14 (1) FACTORS CONSIDERED.—In determining 

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

16 health care lawsuit, the trier of fact shall consider 

17 only the following— 

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

19 conduct of such party; 

20 (B) the duration of the conduct or any 

21 concealment of it by such party; 

22 (C) the profitability of the conduct to such 

23 party; 

24 (D) the number of products sold or med25 ical procedures rendered for compensation, as 


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

2 causing the harm complained of by the claim3 ant; 

4 (E) any criminal penalties imposed on such 

5 party, as a result of the conduct complained of 

6 by the claimant; and 

7 (F) the amount of any civil fines assessed 

8 against such party as a result of the conduct 

9 complained of by the claimant. 

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

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

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

13 the amount of economic damages awarded, which14 ever is greater. The jury shall not be informed of 

15 this limitation. 

16 SEC. 306. AUTHORIZATION OF PAYMENT OF FUTURE DAM17 AGES TO CLAIMANTS IN HEALTH CARE LAW18 SUITS. 

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

20 award of future damages, without reduction to present 

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

22 party with sufficient insurance or other assets to fund a 

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

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

25 the future damages be paid by periodic payments. In any 


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1 health care lawsuit, the court may be guided by the Uni2 form Periodic Payment of Judgments Act promulgated by 

3 the National Conference of Commissioners on Uniform 

4 State Laws. 

5 (b) APPLICABILITY.—This section applies to all ac6 tions which have not been first set for trial or retrial be7 fore the effective date of this title. 

8 SEC. 307. DEFINITIONS. 

9 In this title: 

10 (1) ALTERNATIVE DISPUTE RESOLUTION SYS11 TEM; ADR.—The term ‘‘alternative dispute resolution 

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

13 for the resolution of health care lawsuits in a man14 ner other than through a civil action brought in a 

15 State or Federal court. 

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

17 any person who brings a health care lawsuit, includ18 ing a person who asserts or claims a right to legal 

19 or equitable contribution, indemnity, or subrogation, 

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

21 and any person on whose behalf such a claim is as22 serted or such an action is brought, whether de23 ceased, incompetent, or a minor. 

24 (3) COLLATERAL SOURCE BENEFITS.—The 

25 term ‘‘collateral source benefits’’ means any amount 


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1 paid or reasonably likely to be paid in the future to 

2 or on behalf of the claimant, or any service, product, 

3 or other benefit provided or reasonably likely to be 

4 provided in the future to or on behalf of the claim5 ant, as a result of the injury or wrongful death, pur6 suant to— 

7 (A) any State or Federal health, sickness, 

8 income-disability, accident, or workers’ com9 pensation law; 

10 (B) any health, sickness, income-disability, 

11 or accident insurance that provides health bene12 fits or income-disability coverage; 

13 (C) any contract or agreement of any 

14 group, organization, partnership, or corporation 

15 to provide, pay for, or reimburse the cost of 

16 medical, hospital, dental, or income-disability 

17 benefits; and 

18 (D) any other publicly or privately funded 

19 program. 

20 (4) COMPENSATORY DAMAGES.—The term 

21 ‘‘compensatory damages’’ means objectively 

22 verifiable monetary losses incurred as a result of the 

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

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1 penses, loss of past and future earnings, cost of ob2 taining domestic services, loss of employment, and 

3 loss of business or employment opportunities, dam4 ages for physical and emotional pain, suffering, in5 convenience, physical impairment, mental anguish, 

6 disfigurement, loss of enjoyment of life, loss of soci7 ety and companionship, loss of consortium (other 

8 than loss of domestic service), hedonic damages, in9 jury to reputation, and all other nonpecuniary losses 

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

11 damages’’ includes economic damages and non12 economic damages, as such terms are defined in this 

13 section. 

14 (5) CONTINGENT FEE.—The term ‘‘contingent 

15 fee’’ includes all compensation to any person or per16 sons which is payable only if a recovery is effected 

17 on behalf of one or more claimants. 

18 (6) ECONOMIC DAMAGES.—The term ‘‘economic 

19 damages’’ means objectively verifiable monetary 

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

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

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

23 past and future medical expenses, loss of past and 

24 future earnings, cost of obtaining domestic services, 


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1 loss of employment, and loss of business or employ2 ment opportunities. 

3 (7) HEALTH CARE LAWSUIT.—The term 

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

5 claim concerning the provision of health care goods 

6 or services or any medical product affecting inter7 state commerce, or any health care liability action 

8 concerning the provision of health care goods or 

9 services or any medical product affecting interstate 

10 commerce, brought in a State or Federal court or 

11 pursuant to an alternative dispute resolution system, 

12 against a health care provider, a health care organi13 zation, or the manufacturer, distributor, supplier, 

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

15 regardless of the theory of liability on which the 

16 claim is based, or the number of claimants, plain17 tiffs, defendants, or other parties, or the number of 

18 claims or causes of action, in which the claimant al19 leges a health care liability claim. Such term does 

20 not include a claim or action which is based on 

21 criminal liability; which seeks civil fines or penalties 

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

23 is grounded in antitrust. 

24 (8) HEALTH CARE LIABILITY ACTION.—The 

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1 tion brought in a State or Federal court or pursuant 

2 to an alternative dispute resolution system, against 

3 a health care provider, a health care organization, or 

4 the manufacturer, distributor, supplier, marketer, 

5 promoter, or seller of a medical product, regardless 

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

7 or the number of plaintiffs, defendants, or other par8 ties, or the number of causes of action, in which the 

9 claimant alleges a health care liability claim. 

10 (9) HEALTH CARE LIABILITY CLAIM.—The 

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

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

13 against a health care provider, health care organiza14 tion, or the manufacturer, distributor, supplier, mar15 keter, promoter, or seller of a medical product, in16 cluding, but not limited to, third-party claims, cross17 claims, counter-claims, or contribution claims, which 

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

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

20 care services or medical products, regardless of the 

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

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

23 the number of causes of action. 

24 (10) HEALTH CARE ORGANIZATION.—The term 

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1 tity which is obligated to provide or pay for health 

2 benefits under any health plan, including any person 

3 or entity acting under a contract or arrangement 

4 with a health care organization to provide or admin5 ister any health benefit. 

6 (11) HEALTH CARE PROVIDER.—The term 

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

8 required by State or Federal laws or regulations to 

9 be licensed, registered, or certified to provide health 

10 care services, and being either so licensed, reg11 istered, or certified, or exempted from such require12 ment by other statute or regulation. 

13 (12) HEALTH CARE GOODS OR SERVICES.—The 

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

15 goods or services provided by a health care organiza16 tion, provider, or by any individual working under 

17 the supervision of a health care provider, that relates 

18 to the diagnosis, prevention, or treatment of any 

19 human disease or impairment, or the assessment or 

20 care of the health of human beings. 

21 (13) MALICIOUS INTENT TO INJURE.—The 

22 term ‘‘malicious intent to injure’’ means inten23 tionally causing or attempting to cause physical in24 jury other than providing health care goods or serv25 ices. 


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1 (14) MEDICAL PRODUCT.—The term ‘‘medical 

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

3 intended for humans, and the terms ‘‘drug’’, ‘‘de4 vice’’, and ‘‘biological product’’ have the meanings 

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

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

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

8 Public Health Service Act (42 U.S.C. 262(a)), re9 spectively, including any component or raw material 

10 used therein, but excluding health care services. 

11 (15) NONECONOMIC DAMAGES.—The term 

12 ‘‘noneconomic damages’’ means damages for phys13 ical and emotional pain, suffering, inconvenience, 

14 physical impairment, mental anguish, disfigurement, 

15 loss of enjoyment of life, loss of society and compan16 ionship, loss of consortium (other than loss of do17 mestic service), hedonic damages, injury to reputa18 tion, and all other nonpecuniary losses of any kind 

19 or nature. 

20 (16) PUNITIVE DAMAGES.—The term ‘‘punitive 

21 damages’’ means damages awarded, for the purpose 

22 of punishment or deterrence, and not solely for com23 pensatory purposes, against a health care provider, 

24 health care organization, or a manufacturer, dis25 tributor, or supplier of a medical product. Punitive 


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1 damages are neither economic nor noneconomic 

2 damages. 

3 (17) RECOVERY.—The term ‘‘recovery’’ means 

4 the net sum recovered after deducting any disburse5 ments or costs incurred in connection with prosecu6 tion or settlement of the claim, including all costs 

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

8 incurred by the plaintiff and the attorneys’ office 

9 overhead costs or charges for legal services are not 

10 deductible disbursements or costs for such purpose. 

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

12 the several States, the District of Columbia, the 

13 Commonwealth of Puerto Rico, the Virgin Islands, 

14 Guam, American Samoa, the Northern Mariana Is15 lands, the Trust Territory of the Pacific Islands, and 

16 any other territory or possession of the United 

17 States, or any political subdivision thereof. 

18 SEC. 308. EFFECT ON OTHER LAWS. 

19 (a) VACCINE INJURY.— 

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

21 Health Service Act establishes a Federal rule of law 

22 applicable to a civil action brought for a vaccine-re23 lated injury or death— 

24 (A) this title does not affect the application 

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


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

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

3 shall not apply to such action. 

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

5 brought for a vaccine-related injury or death to 

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

7 Public Health Service Act does not apply, then this 

8 title or otherwise applicable law (as determined 

9 under this title) will apply to such aspect of such ac10 tion. 

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

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

13 any defense available to a defendant in a health care law14 suit or action under any other provision of Federal law. 

15 SEC. 309. STATE FLEXIBILITY AND PROTECTION OF 

16 STATES’ RIGHTS. 

17 (a) HEALTH CARE LAWSUITS.—The provisions gov18 erning health care lawsuits set forth in this title preempt, 

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

20 that State law prevents the application of any provisions 

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

22 governing health care lawsuits set forth in this title super23 sede chapter 171 of title 28, United States Code, to the 

24 extent that such chapter— 


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1 (1) provides for a greater amount of damages 

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

3 care lawsuit may be commenced, or a reduced appli4 cability or scope of periodic payment of future dam5 ages, than provided in this title; or 

6 (2) prohibits the introduction of evidence re7 garding collateral source benefits, or mandates or 

8 permits subrogation or a lien on collateral source 

9 benefits. 

10 (b) PROTECTION OF STATES’ RIGHTS AND OTHER

11 LAWS.—(1) Any issue that is not governed by any provi12 sion of law established by or under this title (including 

13 State standards of negligence) shall be governed by other14 wise applicable State or Federal law. 

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

16 State or Federal law that imposes greater procedural or 

17 substantive protections for health care providers and 

18 health care organizations from liability, loss, or damages 

19 than those provided by this title or create a cause of ac20 tion. 

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

22 shall be construed to preempt— 

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

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

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1 satory or punitive damages (or the total amount of 

2 damages) that may be awarded in a health care law3 suit, regardless of whether such monetary amount is 

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

5 notwithstanding section 302(a); or 

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

7 care lawsuit under any other provision of State or 

8 Federal law. 

9 SEC. 310. APPLICABILITY; EFFECTIVE DATE. 

10 This title shall apply to any health care lawsuit 

11 brought in a Federal or State court, or subject to an alter12 native dispute resolution system, that is initiated on or 

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

14 any health care lawsuit arising from an injury occurring 

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

16 governed by the applicable statute of limitations provisions 

17 in effect at the time the injury occurred. 

18 DIVISION D—PROTECTING THE 

19 DOCTOR-PATIENT RELATION20 SHIP 

21 SEC. 401. RULE OF CONSTRUCTION. 

22 Nothing in this Act shall be construed to interfere 

23 with the doctor-patient relationship or the practice of med24 icine. 


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1 SEC. 402. REPEAL OF FEDERAL COORDINATING COUNCIL 

2 FOR COMPARATIVE EFFECTIVENESS RE3 SEARCH. 

4 Effective on the date of the enactment of this Act, 

5 section 804 of the American Recovery and Reinvestment 

6 Act of 2009 is repealed. 

7 DIVISION E—INCENTIVIZING 

8 WELLNESS AND QUALITY IM9 PROVEMENTS 

10 SEC. 501. INCENTIVES FOR PREVENTION AND WELLNESS 

11 PROGRAMS. 

12 (a) EMPLOYEE RETIREMENT INCOME SECURITY ACT

13 OF 1974 LIMITATION ON EXCEPTION FOR WELLNESS

14 PROGRAMS UNDER HIPAA DISCRIMINATION RULES.— 

15 (1) IN GENERAL.—Section 702(b)(2) of the 

16 Employee Retirement Income Security Act of 1974 

17 (29 U.S.C. 1182(b)(2)) is amended by adding after 

18 and below subparagraph (B) the following: 

19 ‘‘In applying subparagraph (B), a group health plan 

20 (or a health insurance issuer with respect to health 

21 insurance coverage) may vary premiums and cost22 sharing by up to 50 percent of the value of the bene23 fits under the plan (or coverage) based on participa24 tion in a standards-based wellness program.’’. 

25 (2) EFFECTIVE DATE.—The amendment made 

26 by paragraph (1) shall apply to plan years beginning 


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1 more than 1 year after the date of the enactment of 

2 this Act. 

3 (b) CONFORMING AMENDMENTS TO PHSA.— 

4 (1) GROUP MARKET RULES.— 

5 (A) IN GENERAL.—Section 2702(b)(2) of 

6 the Public Health Service Act (42 U.S.C. 

7 300gg–1(b)(2)) is amended by adding after and 

8 below subparagraph (B) the following: 

9 ‘‘In applying subparagraph (B), a group health plan 

10 (or a health insurance issuer with respect to health 

11 insurance coverage) may vary premiums and cost12 sharing by up to 50 percent of the value of the bene13 fits under the plan (or coverage) based on participa14 tion in a standards-based wellness program.’’. 

15 (B) EFFECTIVE DATE.—The amendment 

16 made by subparagraph (A) shall apply to plan 

17 years beginning more than 1 year after the date 

18 of the enactment of this Act. 

19 (2) INDIVIDUAL MARKET RULES RELATING TO

20 GUARANTEED AVAILABILITY.— 

21 (A) IN GENERAL.—Section 2741(f) of the 

22 Public Health Service Act (42 U.S.C. 300gg– 

23 1(b)(2)) is amended by adding after and below 

24 paragraph (1) the following: 


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1 ‘‘In applying paragraph (2), a health insurance issuer may 

2 vary premiums and cost-sharing under health insurance 

3 coverage by up to 50 percent of the value of the benefits 

4 under the coverage based on participation in a standards5 based wellness program.’’. 

6 (B) EFFECTIVE DATE.—The amendment 

7 made by paragraph (1) shall apply to health in8 surance coverage offered or renewed on and 

9 after the date that is 1 year after the date of 

10 the enactment of this Act. 

11 (c) CONFORMING AMENDMENTS TO IRC.— 

12 (1) IN GENERAL.—Section 9802(b)(2) of the 

13 Internal Revenue Code of 1986 is amended by add14 ing after and below subparagraph (B) the following: 

15 ‘‘In applying subparagraph (B), a group health plan 

16 (or a health insurance issuer with respect to health 

17 insurance coverage) may vary premiums and cost18 sharing by up to 50 percent of the value of the bene19 fits under the plan (or coverage) based on participa20 tion in a standards-based wellness program.’’. 

21 (2) EFFECTIVE DATE.—The amendment made 

22 by paragraph (1) shall apply to plan years beginning 

23 more than 1 year after the date of the enactment of 

24 this Act. 


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1 DIVISION F—PROTECTING 

2 TAXPAYERS 

3 SEC. 601. PROVIDE FULL FUNDING TO HHS OIG AND 

4 HCFAC. 

5 (a) HCFAC FUNDING.—Section 1817(k)(3)(A) of 

6 the Social Security Act (42 U.S.C. 1395i(k)(3)(A)) is 

7 amended— 

8 (1) in clause (i), by amending subclause (V) to 

9 read as follows: 

10 ‘‘(V) for each fiscal year after fis11 cal year 2010, $300,000,000.’’; and 

12 (2) in clause (ii)(X), by inserting before the pe13 riod at the end the following: ‘‘, plus the amount by 

14 which the amount made available under clause (i)(V) 

15 for fiscal year 2011 exceeds the amount made avail16 able under clause (i)(IV) for fiscal year 2010’’. 

17 (b) OIG FUNDING.—There are authorized to be ap18 propriated for each of fiscal years 2011 through 2020 

19 $100,000,000 for the Office of the Inspector General of 

20 the Department of Health and Human Services for fraud 

21 prevention activities under the Medicare and Medicaid 

22 programs. 


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1 SEC. 602. PROHIBITING TAXPAYER FUNDED ABORTIONS 

2 AND CONSCIENCE PROTECTIONS. 

3 Title 1 of the United States Code is amended by add4 ing at the end the following new chapter: 

5 ‘‘CHAPTER 4—PROHIBITING TAXPAYER 

6 FUNDED ABORTIONS AND CON7 SCIENCE PROTECTIONS 

8 ‘‘SEC. 301. PROHIBITION ON FUNDING FOR ABORTIONS. 

9 ‘‘No funds authorized or appropriated by Federal 

10 law, and none of the funds in any trust fund to which 

11 funds are authorized or appropriated by Federal law, shall 

12 be expended for any abortion. 

13 ‘‘SEC. 302. PROHIBITION ON FUNDING FOR HEALTH BENE14 FITS PLANS THAT COVER ABORTION. 

15 ‘‘None of the funds authorized or appropriated by 

16 Federal law, and none of the funds in any trust fund to 

17 which funds are authorized or appropriated by Federal 

18 law, shall be expended for a health benefits plan that in19 cludes coverage of abortion. 

20 ‘‘SEC. 303. TREATMENT OF ABORTIONS RELATED TO RAPE, 

21 INCEST, OR PRESERVING THE LIFE OF THE 

22 MOTHER. 

23 ‘‘The limitations established in sections 301 and 302 

24 shall not apply to an abortion— 

25 ‘‘(1) if the pregnancy is the result of an act of 

26 rape or incest; or 


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1 ‘‘(2) in the case where a woman suffers from a 

2 physical disorder, physical injury, or physical illness 

3 that would, as certified by a physician, place the 

4 woman in danger of death unless an abortion is per5 formed, including a life-endangering physical condi6 tion caused by or arising from the pregnancy itself. 

7 ‘‘SEC. 304. CONSTRUCTION RELATING TO SUPPLEMENTAL 

8 COVERAGE. 

9 ‘‘Nothing in this chapter shall be construed as pro10 hibiting any individual, entity, or State or locality from 

11 purchasing separate supplemental abortion plan or cov12 erage that includes abortion so long as such plan or cov13 erage is paid for entirely using only funds not authorized 

14 or appropriated by Federal law and such plan or coverage 

15 shall not be purchased using matching funds required for 

16 a federally subsidized program, including a State’s or lo17 cality’s contribution of Medicaid matching funds. 

18 ‘‘SEC. 305. CONSTRUCTION RELATING TO THE USE OF NON19 FEDERAL FUNDS FOR HEALTH COVERAGE. 

20 ‘‘Nothing in this chapter shall be construed as re21 stricting the ability of any managed care provider or other 

22 organization from offering abortion coverage or the ability 

23 of a State to contract separately with such a provider or 

24 organization for such coverage with funds not authorized 

25 or appropriated by Federal law and such plan or coverage 


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1 shall not be purchased using matching funds required for 

2 a federally subsidized program, including a State’s or lo3 cality’s contribution of Medicaid matching funds. 

4 ‘‘SEC. 306. NO GOVERNMENT DISCRIMINATION AGAINST 

5 CERTAIN HEALTH CARE ENTITIES. 

6 ‘‘(a) IN GENERAL.—No funds authorized or appro7 priated by Federal law may be made available to a Federal 

8 agency or program, or to a State or local government, if 

9 such agency, program, or government subjects any institu10 tional or individual health care entity to discrimination on 

11 the basis that the health care entity does not provide, pay 

12 for, provide coverage of, or refer for abortions. 

13 ‘‘(b) HEALTH CARE ENTITY DEFINED.—For pur14 poses of this section, the term ‘health care entity’ includes 

15 an individual physician or other health care professional, 

16 a hospital, a provider-sponsored organization, a health 

17 maintenance organization, a health insurance plan, or any 

18 other kind of health care facility, organization, or plan.’’. 

19 SEC. 603. IMPROVED ENFORCEMENT OF THE MEDICARE 

20 AND MEDICAID SECONDARY PAYER PROVI21 SIONS. 

22 (a) MEDICARE.— 

23 (1) IN GENERAL.—The Secretary, in coordina24 tion with the Inspector General of the Department 

25 of Health and Human Services, shall provide 


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1 through the Coordination of Benefits Contractor for 

2 the identification of instances where the Medicare 

3 program should be, but is not, acting as a secondary 

4 payer to an individual’s private health benefits cov5 erage under section 1862(b) of the Social Security 

6 Act (42 U.S.C. 1395y(b)). 

7 (2) UPDATING PROCEDURES.—The Secretary 

8 shall update procedures for identifying and resolving 

9 credit balance situations which occur under the 

10 Medicare program when payment under such title 

11 and from other health benefit plans exceed the pro12 viders’ charges or the allowed amount. 

13 (3) REPORT ON IMPROVED ENFORCEMENT.— 

14 Not later than 1 year after the date of the enact15 ment of this Act, the Secretary shall submit a report 

16 to Congress on progress made in improved enforce17 ment of the Medicare secondary payer provisions, in18 cluding recoupment of credit balances. 

19 (b) MEDICAID.—Section 1903 of the Social Security 

20 Act (42 U.S.C. 1396b) is amended by adding at the end 

21 the following new subsection: 

22 ‘‘(aa) ENFORCEMENT OF PAYER OF LAST RESORT

23 PROVISIONS.— 

24 ‘‘(1) SUBMISSION OF STATE PLAN AMEND25 MENT.—Each State shall submit, not later than 1 


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1 year after the date of the enactment of this sub2 section, a State plan amendment that details how 

3 the State will become fully compliant with the re4 quirements of section 1902(a)(25). 

5 ‘‘(2) BONUS FOR COMPLIANCE.—If a State sub6 mits a timely State plan amendment under para7 graph (1) that the Secretary determines provides for 

8 full compliance of the State with the requirements of 

9 section 1902(a)(25), the Secretary shall provide for 

10 an additional payment to the State of $1,000,000. If 

11 a State certifies, to the Secretary’s satisfaction, that 

12 it is already fully compliant with such requirements, 

13 such amount shall be increased to $2,000,000. 

14 ‘‘(3) REDUCTION FOR NONCOMPLIANCE.—If a 

15 State does not submit such an amendment, the Sec16 retary shall reduce the Federal medical assistance 

17 percentage otherwise applicable under this title by 1 

18 percentage point until the State submits such an 

19 amendment. 

20 ‘‘(4) ONGOING REDUCTION.—If at any time the 

21 Secretary determines that a State is not in compli22 ance with section 1902(a)(25), regardless of the sta23 tus of the State’s submission of a State plan amend24 ment under this subsection or previous determina25 tions of compliance such requirements, the Secretary 


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1 shall reduce the Federal medical assistance percent2 age otherwise applicable under this title for the 

3 State by 1 percentage point during the period of 

4 non-compliance as determined by the Secretary.’’. 

5 SEC. 604. STRENGTHEN MEDICARE PROVIDER ENROLL6 MENT STANDARDS AND SAFEGUARDS. 

7 (a) PROTECTING AGAINST THE FRAUDULENT USE

8 OF MEDICARE PROVIDER NUMBERS.—Subject to sub9 section (c)(2)— 

10 (1) SCREENING NEW PROVIDERS.—As a condi11 tion of a provider of services or a supplier, including 

12 durable medical equipment suppliers and home 

13 health agencies, applying for the first time for a pro14 vider number under the Medicare program and be15 fore granting billing privileges under such title, the 

16 Secretary shall screen the provider or supplier for a 

17 criminal background or other financial or oper18 ational irregularities through fingerprinting, licen19 sure checks, site-visits, other database checks. 

20 (2) APPLICATION FEES.—The Secretary shall 

21 impose an application charge on such a provider or 

22 supplier in order to cover the Secretary’s costs in 

23 performing the screening required under paragraph 

24 (1) and that is revenue neutral to the Federal Gov25 ernment. 


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1 (3) PROVISIONAL APPROVAL.—During an ini2 tial, provisional period (specified by the Secretary) 

3 In which such a provider or supplier has been issued 

4 such a number, the Secretary shall provide enhanced 

5 oversight of the activities of such provider or sup6 plier under the Medicare program, such as through 

7 prepayment review and payment limitations. 

8 (4) PENALTIES FOR FALSE STATEMENTS.—In 

9 the case of a provider or supplier that makes a false 

10 statement in an application for such a number, the 

11 Secretary may exclude the provider or supplier from 

12 participation under the Medicare program, or may 

13 impose a civil money penalty (in the amount de14 scribed in section 1128A(a)(4) of the Social Security 

15 Act), in the same manner as the Secretary may im16 pose such an exclusion or penalty under sections 

17 1128 and 1128A, respectively, of such Act in the 

18 case of knowing presentation of a false claim de19 scribed in section 1128A(a)(1)(A) of such Act. 

20 (5) DISCLOSURE REQUIREMENTS.—With re21 spect to approval of such an application, the Sec22 retary— 

23 (A) shall require applicants to disclose pre24 vious affiliation with enrolled entities that have 


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1 uncollected debt related to the Medicare or 

2 Medicaid programs; 

3 (B) may deny approval if the Secretary de4 termines that these affiliations pose undue risk 

5 to the Medicare or Medicaid program, subject 

6 to an appeals process for the applicant as deter7 mined by the Secretary; and 

8 (C) may implement enhanced safeguards 

9 (such as surety bonds). 

10 (b) MORATORIA.—The Secretary may impose mora11 toria on approval of provider and supplier numbers under 

12 the Medicare program for new providers of services and 

13 suppliers as determined necessary to prevent or combat 

14 fraud a period of delay for any one applicant cannot ex15 ceed 30 days unless cause is shown by the Secretary. 

16 (c) FUNDING.— 

17 (1) IN GENERAL.—There are authorized to be 

18 appropriated to carry out this section such sums as 

19 may be necessary. 

20 (2) CONDITION.—The provisions of paragraphs 

21 (1) and (2) of subsection (a) shall not apply unless 

22 and until funds are appropriated to carry out such 

23 provisions. 


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1 SEC. 605. TRACKING BANNED PROVIDERS ACROSS STATE 

2 LINES. 

3 (a) GREATER COORDINATION.—The Secretary of 

4 Health and Human Services shall provide for increased 

5 coordination between the Administrator of the Centers for 

6 Medicare & Medicaid Services (in this section referred to 

7 as ‘‘CMS’’) and its regional offices to ensure that pro8 viders of services and suppliers that have operated in one 

9 State and are excluded from participation in the Medicare 

10 program are unable to begin operation and participation 

11 in the Medicare program in another State. 

12 (b) IMPROVED INFORMATION SYSTEMS.— 

13 (1) IN GENERAL.—The Secretary shall improve 

14 information systems to allow greater integration be15 tween databases under the Medicare program so 

16 that— 

17 (A) Medicare administrative contractors, 

18 fiscal intermediaries, and carriers have imme19 diate access to information identifying providers 

20 and suppliers excluded from participation in the 

21 Medicare and Medicaid program and other Fed22 eral health care programs; and 

23 (B) such information can be shared across 

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1 tration, the Department of Veterans Affairs, 

2 the Department of Defense, the Department of 

3 Justice, and the Office of Personnel Manage4 ment. 

5 (c) MEDICARE/MEDICAID ‘‘ONE PI’’ DATABASE.— 

6 The Secretary shall implement a database that includes 

7 claims and payment data for all components of the Medi8 care program and the Medicaid program. 

9 (d) AUTHORIZING EXPANDED DATA MATCHING.— 

10 Notwithstanding any provision of the Computer Matching 

11 and Privacy Protection Act of 1988 to the contrary— 

12 (1) the Secretary and the Inspector General in 

13 the Department of Health and Human Services may 

14 perform data matching of data from the Medicare 

15 program with data from the Medicaid program; and 

16 (2) the Commissioner of Social Security and the 

17 Secretary may perform data matching of data of the 

18 Social Security Administration with data from the 

19 Medicare and Medicaid programs. 

20 (e) CONSOLIDATION OF DATABASES.—The Secretary 

21 shall consolidate and expand into a centralized database 

22 for individuals and entities that have been excluded from 

23 Federal health care programs the Healthcare Integrity 

24 and Protection Data Bank, the National Practitioner 


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1 Data Bank, the List of Excluded Individuals/Entities, and 

2 a national patient abuse/neglect registry. 

3 (f) COMPREHENSIVE PROVIDER DATABASE.— 

4 (1) ESTABLISHMENT.—The Secretary shall es5 tablish a comprehensive database that includes infor6 mation on providers of services, suppliers, and re7 lated entities participating in the Medicare program, 

8 the Medicaid program, or both. Such database shall 

9 include, information on ownership and business rela10 tionships, history of adverse actions, results of site 

11 visits or other monitoring by any program. 

12 (2) USE.—Prior to issuing a provider or sup13 plier number for an entity under the Medicare pro14 gram, the Secretary shall obtain information on the 

15 entity from such database to assure the entity quali16 fies for the issuance of such a number. 

17 (g) COMPREHENSIVE SANCTIONS DATABASE.—The 

18 Secretary shall establish a comprehensive sanctions data19 base on sanctions imposed on providers of services, sup20 pliers, and related entities. Such database shall be over21 seen by the Inspector General of the Department of 

22 Health and Human Services and shall be linked to related 

23 databases maintained by State licensure boards and by 

24 Federal or State law enforcement agencies. 


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1 (h) ACCESS TO CLAIMS AND PAYMENT DATA2 BASES.—The Secretary shall ensure that the Inspector 

3 General of the Department of Health and Human Services 

4 and Federal law enforcement agencies have direct access 

5 to all claims and payment databases of the Secretary 

6 under the Medicare or Medicaid programs. 

7 (i) CIVIL MONEY PENALTIES FOR SUBMISSION OF

8 ERRONEOUS INFORMATION.—In the case of a provider of 

9 services, supplier, or other entity that submits erroneous 

10 information that serves as a basis for payment of any enti11 ty under the Medicare or Medicaid program, the Secretary 

12 may impose a civil money penalty of not to exceed $50,000 

13 for each such erroneous submission. A civil money penalty 

14 under this subsection shall be imposed and collected in the 

15 same manner as a civil money penalty under subsection 

16 (a) of section 1128A of the Social Security Act is imposed 

17 and collected under that section. 

18 DIVISION G—PATHWAY FOR BIO19 SIMILAR BIOLOGICAL PROD20 UCTS 

21 SEC. 701. LICENSURE PATHWAY FOR BIOSIMILAR BIOLOGI22 CAL PRODUCTS. 

23 (a) LICENSURE OF BIOLOGICAL PRODUCTS AS BIO24 SIMILAR OR INTERCHANGEABLE.—Section 351 of the 

25 Public Health Service Act (42 U.S.C. 262) is amended— 


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1 (1) in subsection (a)(1)(A), by inserting ‘‘under 

2 this subsection or subsection (k)’’ after ‘‘biologics li3 cense’’; and 

4 (2) by adding at the end the following: 

5 ‘‘(k) LICENSURE OF BIOLOGICAL PRODUCTS AS BIO6 SIMILAR OR INTERCHANGEABLE.— 

7 ‘‘(1) IN GENERAL.—Any person may submit an 

8 application for licensure of a biological product 

9 under this subsection. 

10 ‘‘(2) CONTENT.— 

11 ‘‘(A) IN GENERAL.— 

12 ‘‘(i) REQUIRED INFORMATION.—An 

13 application submitted under this subsection 

14 shall include information demonstrating 

15 that— 

16 ‘‘(I) the biological product is bio17 similar to a reference product based 

18 upon data derived from— 

19 ‘‘(aa) analytical studies that 

20 demonstrate that the biological 

21 product is highly similar to the 

22 reference product notwith23 standing minor differences in 

24 clinically inactive components; 


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1 ‘‘(bb) animal studies (includ2 ing the assessment of toxicity); 

3 and 

4 ‘‘(cc) a clinical study or 

5 studies (including the assessment 

6 of immunogenicity and phar7 macokinetics or 

8 pharmacodynamics) that are suf9 ficient to demonstrate safety, pu10 rity, and potency in 1 or more 

11 appropriate conditions of use for 

12 which the reference product is li13 censed and intended to be used 

14 and for which licensure is sought 

15 for the biological product; 

16 ‘‘(II) the biological product and 

17 reference product utilize the same 

18 mechanism or mechanisms of action 

19 for the condition or conditions of use 

20 prescribed, recommended, or sug21 gested in the proposed labeling, but 

22 only to the extent the mechanism or 

23 mechanisms of action are known for 

24 the reference product; 


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1 ‘‘(III) the condition or conditions 

2 of use prescribed, recommended, or 

3 suggested in the labeling proposed for 

4 the biological product have been pre5 viously approved for the reference 

6 product; 

7 ‘‘(IV) the route of administra8 tion, the dosage form, and the 

9 strength of the biological product are 

10 the same as those of the reference 

11 product; and 

12 ‘‘(V) the facility in which the bio13 logical product is manufactured, proc14 essed, packed, or held meets stand15 ards designed to assure that the bio16 logical product continues to be safe, 

17 pure, and potent. 

18 ‘‘(ii) DETERMINATION BY SEC19 RETARY.—The Secretary may determine, 

20 in the Secretary’s discretion, that an ele21 ment described in clause (i)(I) is unneces22 sary in an application submitted under this 

23 subsection. 


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1 ‘‘(iii) ADDITIONAL INFORMATION.— 

2 An application submitted under this sub3 section— 

4 ‘‘(I) shall include publicly avail5 able information regarding the Sec6 retary’s previous determination that 

7 the reference product is safe, pure, 

8 and potent; and 

9 ‘‘(II) may include any additional 

10 information in support of the applica11 tion, including publicly available infor12 mation with respect to the reference 

13 product or another biological product. 

14 ‘‘(B) INTERCHANGEABILITY.—An applica15 tion (or a supplement to an application) sub16 mitted under this subsection may include infor17 mation demonstrating that the biological prod18 uct meets the standards described in paragraph 

19 (4). 

20 ‘‘(3) EVALUATION BY SECRETARY.—Upon re21 view of an application (or a supplement to an appli22 cation) submitted under this subsection, the Sec23 retary shall license the biological product under this 

24 subsection if— 


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1 ‘‘(A) the Secretary determines that the in2 formation submitted in the application (or the 

3 supplement) is sufficient to show that the bio4 logical product— 

5 ‘‘(i) is biosimilar to the reference 

6 product; or 

7 ‘‘(ii) meets the standards described in 

8 paragraph (4), and therefore is inter9 changeable with the reference product; and 

10 ‘‘(B) the applicant (or other appropriate 

11 person) consents to the inspection of the facility 

12 that is the subject of the application, in accord13 ance with subsection (c). 

14 ‘‘(4) SAFETY STANDARDS FOR DETERMINING

15 INTERCHANGEABILITY.—Upon review of an applica16 tion submitted under this subsection or any supple17 ment to such application, the Secretary shall deter18 mine the biological product to be interchangeable 

19 with the reference product if the Secretary deter20 mines that the information submitted in the applica21 tion (or a supplement to such application) is suffi22 cient to show that— 

23 ‘‘(A) the biological product— 

24 ‘‘(i) is biosimilar to the reference 

25 product; and 


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1 ‘‘(ii) can be expected to produce the 

2 same clinical result as the reference prod3 uct in any given patient; and 

4 ‘‘(B) for a biological product that is ad5 ministered more than once to an individual, the 

6 risk in terms of safety or diminished efficacy of 

7 alternating or switching between use of the bio8 logical product and the reference product is not 

9 greater than the risk of using the reference 

10 product without such alternation or switch. 

11 ‘‘(5) GENERAL RULES.— 

12 ‘‘(A) ONE REFERENCE PRODUCT PER AP13 PLICATION.—A biological product, in an appli14 cation submitted under this subsection, may not 

15 be evaluated against more than 1 reference 

16 product. 

17 ‘‘(B) REVIEW.—An application submitted 

18 under this subsection shall be reviewed by the 

19 division within the Food and Drug Administra20 tion that is responsible for the review and ap21 proval of the application under which the ref22 erence product is licensed. 

23 ‘‘(C) RISK EVALUATION AND MITIGATION

24 STRATEGIES.—The authority of the Secretary 

25 with respect to risk evaluation and mitigation 


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1 strategies under the Federal Food, Drug, and 

2 Cosmetic Act shall apply to biological products 

3 licensed under this subsection in the same man4 ner as such authority applies to biological prod5 ucts licensed under subsection (a). 

6 ‘‘(D) RESTRICTIONS ON BIOLOGICAL PROD7 UCTS CONTAINING DANGEROUS INGREDI8 ENTS.—If information in an application sub9 mitted under this subsection, in a supplement 

10 to such an application, or otherwise available to 

11 the Secretary shows that a biological product— 

12 ‘‘(i) is, bears, or contains a select 

13 agent or toxin listed in section 73.3 or 

14 73.4 of title 42, section 121.3 or 121.4 of 

15 title 9, or section 331.3 of title 7, Code of 

16 Federal Regulations (or any successor reg17 ulations); or 

18 ‘‘(ii) is, bears, or contains a controlled 

19 substance in schedule I or II of section 

20 202 of the Controlled Substances Act, as 

21 listed in part 1308 of title 21, Code of 

22 Federal Regulations (or any successor reg23 ulations); 

24 the Secretary shall not license the biological 

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1 retary determines, after consultation with ap2 propriate national security and drug enforce3 ment agencies, that there would be no increased 

4 risk to the security or health of the public from 

5 licensing such biological product under this sub6 section. 

7 ‘‘(6) EXCLUSIVITY FOR FIRST INTERCHANGE8 ABLE BIOLOGICAL PRODUCT.—Upon review of an 

9 application submitted under this subsection relying 

10 on the same reference product for which a prior bio11 logical product has received a determination of inter12 changeability for any condition of use, the Secretary 

13 shall not make a determination under paragraph (4) 

14 that the second or subsequent biological product is 

15 interchangeable for any condition of use until the 

16 earlier of— 

17 ‘‘(A) 1 year after the first commercial 

18 marketing of the first interchangeable bio19 similar biological product to be approved as 

20 interchangeable for that reference product; 

21 ‘‘(B) 18 months after— 

22 ‘‘(i) a final court decision on all pat23 ents in suit in an action instituted under 

24 subsection (l)(5) against the applicant that 

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1 proved interchangeable biosimilar biological 

2 product; or 

3 ‘‘(ii) the dismissal with or without 

4 prejudice of an action instituted under sub5 section (l)(5) against the applicant that 

6 submitted the application for the first ap7 proved interchangeable biosimilar biological 

8 product; or 

9 ‘‘(C)(i) 42 months after approval of the 

10 first interchangeable biosimilar biological prod11 uct if the applicant that submitted such appli12 cation has been sued under subsection (l)(5) 

13 and such litigation is still ongoing within such 

14 42-month period; or 

15 ‘‘(ii) 18 months after approval of the first 

16 interchangeable biosimilar biological product if 

17 the applicant that submitted such application 

18 has not been sued under subsection (l)(5). 

19 For purposes of this paragraph, the term ‘final court 

20 decision’ means a final decision of a court from 

21 which no appeal (other than a petition to the United 

22 States Supreme Court for a writ of certiorari) has 

23 been or can be taken. 

24 ‘‘(7) EXCLUSIVITY FOR REFERENCE PROD25 UCT.— 


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1 ‘‘(A) EFFECTIVE DATE OF BIOSIMILAR AP2 PLICATION APPROVAL.—Approval of an applica3 tion under this subsection may not be made ef4 fective by the Secretary until the date that is 

5 12 years after the date on which the reference 

6 product was first licensed under subsection (a). 

7 ‘‘(B) FILING PERIOD.—An application 

8 under this subsection may not be submitted to 

9 the Secretary until the date that is 4 years 

10 after the date on which the reference product 

11 was first licensed under subsection (a). 

12 ‘‘(C) FIRST LICENSURE.—Subparagraphs 

13 (A) and (B) shall not apply to a license for or 

14 approval of— 

15 ‘‘(i) a supplement for the biological 

16 product that is the reference product; or 

17 ‘‘(ii) a subsequent application filed by 

18 the same sponsor or manufacturer of the 

19 biological product that is the reference 

20 product (or a licensor, predecessor in inter21 est, or other related entity) for— 

22 ‘‘(I) a change (not including a 

23 modification to the structure of the bi24 ological product) that results in a new 

25 indication, route of administration, 


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1 dosing schedule, dosage form, delivery 

2 system, delivery device, or strength; or 

3 ‘‘(II) a modification to the struc4 ture of the biological product that 

5 does not result in a change in safety, 

6 purity, or potency. 

7 ‘‘(8) PEDIATRIC STUDIES.— 

8 ‘‘(A) EXCLUSIVITY.—If, before or after li9 censure of the reference product under sub10 section (a) of this section, the Secretary deter11 mines that information relating to the use of 

12 such product in the pediatric population may 

13 produce health benefits in that population, the 

14 Secretary makes a written request for pediatric 

15 studies (which shall include a timeframe for 

16 completing such studies), the applicant or hold17 er of the approved application agrees to the re18 quest, such studies are completed using appro19 priate formulations for each age group for 

20 which the study is requested within any such 

21 timeframe, and the reports thereof are sub22 mitted and accepted in accordance with section 

23 505A(d)(3) of the Federal Food, Drug, and 

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1 graph (7)(A) of this subsection is deemed to be 

2 12 years and 6 months rather than 12 years. 

3 ‘‘(B) EXCEPTION.—The Secretary shall 

4 not extend the period referred to in subpara5 graph (A) of this paragraph if the determina6 tion under section 505A(d)(3) of the Federal 

7 Food, Drug, and Cosmetic Act is made later 

8 than 9 months prior to the expiration of such 

9 period. 

10 ‘‘(C) APPLICATION OF CERTAIN PROVI11 SIONS.—The provisions of subsections (a), (d), 

12 (e), (f), (h), (j), (k), and (l) of section 505A of 

13 the Federal Food, Drug, and Cosmetic Act 

14 shall apply with respect to the extension of a 

15 period under subparagraph (A) of this para16 graph to the same extent and in the same man17 ner as such provisions apply with respect to the 

18 extension of a period under subsection (b) or 

19 (c) of section 505A of the Federal Food, Drug, 

20 and Cosmetic Act. 

21 ‘‘(9) GUIDANCE DOCUMENTS.— 

22 ‘‘(A) IN GENERAL.—The Secretary may, 

23 after opportunity for public comment, issue 

24 guidance in accordance, except as provided in 

25 subparagraph (B)(i), with section 701(h) of the 


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1 Federal Food, Drug, and Cosmetic Act with re2 spect to the licensure of a biological product 

3 under this subsection. Any such guidance may 

4 be general or specific. 

5 ‘‘(B) PUBLIC COMMENT.— 

6 ‘‘(i) IN GENERAL.—The Secretary 

7 shall provide the public an opportunity to 

8 comment on any proposed guidance issued 

9 under subparagraph (A) before issuing 

10 final guidance. 

11 ‘‘(ii) INPUT REGARDING MOST VALU12 ABLE GUIDANCE.—The Secretary shall es13 tablish a process through which the public 

14 may provide the Secretary with input re15 garding priorities for issuing guidance. 

16 ‘‘(C) NO REQUIREMENT FOR APPLICATION

17 CONSIDERATION.—The issuance (or non18 issuance) of guidance under subparagraph (A) 

19 shall not preclude the review of, or action on, 

20 an application submitted under this subsection. 

21 ‘‘(D) REQUIREMENT FOR PRODUCT CLASS22 SPECIFIC GUIDANCE.—If the Secretary issues 

23 product class-specific guidance under subpara24 graph (A), such guidance shall include a de25 scription of— 


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1 ‘‘(i) the criteria that the Secretary will 

2 use to determine whether a biological prod3 uct is highly similar to a reference product 

4 in such product class; and 

5 ‘‘(ii) the criteria, if available, that the 

6 Secretary will use to determine whether a 

7 biological product meets the standards de8 scribed in paragraph (4). 

9 ‘‘(E) CERTAIN PRODUCT CLASSES.— 

10 ‘‘(i) GUIDANCE.—The Secretary may 

11 indicate in a guidance document that the 

12 science and experience, as of the date of 

13 such guidance, with respect to a product or 

14 product class (not including any recom15 binant protein) does not allow approval of 

16 an application for a license as provided 

17 under this subsection for such product or 

18 product class. 

19 ‘‘(ii) MODIFICATION OR REVERSAL.— 

20 The Secretary may issue a subsequent 

21 guidance document under subparagraph 

22 (A) to modify or reverse a guidance docu23 ment under clause (i). 

24 ‘‘(iii) NO EFFECT ON ABILITY TO

25 DENY LICENSE.—Clause (i) shall not be 


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1 construed to require the Secretary to ap2 prove a product with respect to which the 

3 Secretary has not indicated in a guidance 

4 document that the science and experience, 

5 as described in clause (i), does not allow 

6 approval of such an application. 

7 ‘‘(10) NAMING.—The Secretary shall ensure 

8 that the labeling and packaging of each biological 

9 product licensed under this subsection bears a name 

10 that uniquely identifies the biological product and 

11 distinguishes it from the reference product and any 

12 other biological products licensed under this sub13 section following evaluation against such reference 

14 product. 

15 ‘‘(l) PATENT NOTICES; RELATIONSHIP TO FINAL AP16 PROVAL.— 

17 ‘‘(1) DEFINITIONS.—For the purposes of this 

18 subsection, the term— 

19 ‘‘(A) ‘biosimilar product’ means the bio20 logical product that is the subject of the appli21 cation under subsection (k); 

22 ‘‘(B) ‘relevant patent’ means a patent 

23 that— 


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1 ‘‘(i) expires after the date specified in 

2 subsection (k)(7)(A) that applies to the 

3 reference product; and 

4 ‘‘(ii) could reasonably be asserted 

5 against the applicant due to the unauthor6 ized making, use, sale, or offer for sale 

7 within the United States, or the importa8 tion into the United States of the bio9 similar product, or materials used in the 

10 manufacture of the biosimilar product, or 

11 due to a use of the biosimilar product in 

12 a method of treatment that is indicated in 

13 the application; 

14 ‘‘(C) ‘reference product sponsor’ means the 

15 holder of an approved application or license for 

16 the reference product; and 

17 ‘‘(D) ‘interested third party’ means a per18 son other than the reference product sponsor 

19 that owns a relevant patent, or has the right to 

20 commence or participate in an action for in21 fringement of a relevant patent. 

22 ‘‘(2) HANDLING OF CONFIDENTIAL INFORMA23 TION.—Any entity receiving confidential information 

24 pursuant to this subsection shall designate one or 

25 more individuals to receive such information. Each 


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1 individual so designated shall execute an agreement 

2 in accordance with regulations promulgated by the 

3 Secretary. The regulations shall require each such 

4 individual to take reasonable steps to maintain the 

5 confidentiality of information received pursuant to 

6 this subsection and use the information solely for 

7 purposes authorized by this subsection. The obliga8 tions imposed on an individual who has received con9 fidential information pursuant to this subsection 

10 shall continue until the individual returns or de11 stroys the confidential information, a court imposes 

12 a protective order that governs the use or handling 

13 of the confidential information, or the party pro14 viding the confidential information agrees to other 

15 terms or conditions regarding the handling or use of 

16 the confidential information. 

17 ‘‘(3) PUBLIC NOTICE BY SECRETARY.—Within 

18 30 days of acceptance by the Secretary of an appli19 cation filed under subsection (k), the Secretary shall 

20 publish a notice identifying— 

21 ‘‘(A) the reference product identified in the 

22 application; and 

23 ‘‘(B) the name and address of an agent 

24 designated by the applicant to receive notices 

25 pursuant to paragraph (4)(B). 


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1 ‘‘(4) EXCHANGES CONCERNING PATENTS.— 

2 ‘‘(A) EXCHANGES WITH REFERENCE

3 PRODUCT SPONSOR.— 

4 ‘‘(i) Within 30 days of the date of ac5 ceptance of the application by the Sec6 retary, the applicant shall provide the ref7 erence product sponsor with a copy of the 

8 application and information concerning the 

9 biosimilar product and its production. This 

10 information shall include a detailed de11 scription of the biosimilar product, its 

12 method of manufacture, and the materials 

13 used in the manufacture of the product. 

14 ‘‘(ii) Within 60 days of the date of re15 ceipt of the information required to be pro16 vided under clause (i), the reference prod17 uct sponsor shall provide to the applicant 

18 a list of relevant patents owned by the ref19 erence product sponsor, or in respect of 

20 which the reference product sponsor has 

21 the right to commence an action of in22 fringement or otherwise has an interest in 

23 the patent as such patent concerns the bio24 similar product. 


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1 ‘‘(iii) If the reference product sponsor 

2 is issued or acquires an interest in a rel3 evant patent after the date on which the 

4 reference product sponsor provides the list 

5 required by clause (ii) to the applicant, the 

6 reference product sponsor shall identify 

7 that patent to the applicant within 30 days 

8 of the date of issue of the patent, or the 

9 date of acquisition of the interest in the 

10 patent, as applicable. 

11 ‘‘(B) EXCHANGES WITH INTERESTED

12 THIRD PARTIES.— 

13 ‘‘(i) At any time after the date on 

14 which the Secretary publishes a notice for 

15 an application under paragraph (3), any 

16 interested third party may provide notice 

17 to the designated agent of the applicant 

18 that the interested third party owns or has 

19 rights under 1 or more patents that may 

20 be relevant patents. The notice shall iden21 tify at least 1 patent and shall designate 

22 an individual who has executed an agree23 ment in accordance with paragraph (2) to 

24 receive confidential information from the 

25 applicant. 


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1 ‘‘(ii) Within 30 days of the date of re2 ceiving notice pursuant to clause (i), the 

3 applicant shall send to the individual des4 ignated by the interested third party the 

5 information specified in subparagraph 

6 (A)(i), unless the applicant and interested 

7 third party otherwise agree. 

8 ‘‘(iii) Within 90 days of the date of 

9 receiving information pursuant to clause 

10 (ii), the interested third party shall provide 

11 to the applicant a list of relevant patents 

12 which the interested third party owns, or 

13 in respect of which the interested third 

14 party has the right to commence or partici15 pate in an action for infringement. 

16 ‘‘(iv) If the interested third party is 

17 issued or acquires an interest in a relevant 

18 patent after the date on which the inter19 ested third party provides the list required 

20 by clause (iii), the interested third party 

21 shall identify that patent within 30 days of 

22 the date of issue of the patent, or the date 

23 of acquisition of the interest in the patent, 

24 as applicable. 


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1 ‘‘(C) IDENTIFICATION OF BASIS FOR IN2 FRINGEMENT.—For any patent identified under 

3 clause (ii) or (iii) of subparagraph (A) or under 

4 clause (iii) or (iv) of subparagraph (B), the ref5 erence product sponsor or the interested third 

6 party, as applicable— 

7 ‘‘(i) shall explain in writing why the 

8 sponsor or the interested third party be9 lieves the relevant patent would be in10 fringed by the making, use, sale, or offer 

11 for sale within the United States, or im12 portation into the United States, of the 

13 biosimilar product or by a use of the bio14 similar product in treatment that is indi15 cated in the application; 

16 ‘‘(ii) may specify whether the relevant 

17 patent is available for licensing; and 

18 ‘‘(iii) shall specify the number and 

19 date of expiration of the relevant patent. 

20 ‘‘(D) CERTIFICATION BY APPLICANT CON21 CERNING IDENTIFIED RELEVANT PATENTS.— 

22 Not later than 45 days after the date on which 

23 a patent is identified under clause (ii) or (iii) of 

24 subparagraph (A) or under clause (iii) or (iv) of 

25 subparagraph (B), the applicant shall send a 


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1 written statement regarding each identified pat2 ent to the party that identified the patent. Such 

3 statement shall either— 

4 ‘‘(i) state that the applicant will not 

5 commence marketing of the biosimilar 

6 product and has requested the Secretary to 

7 not grant final approval of the application 

8 before the date of expiration of the noticed 

9 patent; or 

10 ‘‘(ii) provide a detailed written expla11 nation setting forth the reasons why the 

12 applicant believes— 

13 ‘‘(I) the making, use, sale, or 

14 offer for sale within the United 

15 States, or the importation into the 

16 United States, of the biosimilar prod17 uct, or the use of the biosimilar prod18 uct in a treatment indicated in the ap19 plication, would not infringe the pat20 ent; or 

21 ‘‘(II) the patent is invalid or un22 enforceable. 

23 ‘‘(5) ACTION FOR INFRINGEMENT INVOLVING

24 REFERENCE PRODUCT SPONSOR.—If an action for 

25 infringement concerning a relevant patent identified 


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1 by the reference product sponsor under clause (ii) or 

2 (iii) of paragraph (4)(A), or by an interested third 

3 party under clause (iii) or (iv) of paragraph (4)(B), 

4 is brought within 60 days of the date of receipt of 

5 a statement under paragraph (4)(D)(ii), and the 

6 court in which such action has been commenced de7 termines the patent is infringed prior to the date ap8 plicable under subsection (k)(7)(A) or (k)(8), the 

9 Secretary shall make approval of the application ef10 fective on the day after the date of expiration of the 

11 patent that has been found to be infringed. If more 

12 than one such patent is found to be infringed by the 

13 court, the approval of the application shall be made 

14 effective on the day after the date that the last such 

15 patent expires. 

16 ‘‘(6) NOTIFICATION OF AGREEMENTS.— 

17 ‘‘(A) REQUIREMENTS.— 

18 ‘‘(i) AGREEMENT BETWEEN BIO19 SIMILAR PRODUCT APPLICANT AND REF20 ERENCE PRODUCT SPONSOR.—If a bio21 similar product applicant under subsection 

22 (k) and the reference product sponsor 

23 enter into an agreement described in sub24 paragraph (B), the applicant and sponsor 


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1 shall each file the agreement in accordance 

2 with subparagraph (C). 

3 ‘‘(ii) AGREEMENT BETWEEN BIO4 SIMILAR PRODUCT APPLICANTS.—If 2 or 

5 more biosimilar product applicants submit 

6 an application under subsection (k) for bio7 similar products with the same reference 

8 product and enter into an agreement de9 scribed in subparagraph (B), the appli10 cants shall each file the agreement in ac11 cordance with subparagraph (C). 

12 ‘‘(B) SUBJECT MATTER OF AGREEMENT.— 

13 An agreement described in this subparagraph— 

14 ‘‘(i) is an agreement between the bio15 similar product applicant under subsection 

16 (k) and the reference product sponsor or 

17 between 2 or more biosimilar product ap18 plicants under subsection (k) regarding the 

19 manufacture, marketing, or sale of— 

20 ‘‘(I) the biosimilar product (or 

21 biosimilar products) for which an ap22 plication was submitted; or 

23 ‘‘(II) the reference product; 

24 ‘‘(ii) includes any agreement between 

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1 section (k) and the reference product spon2 sor or between 2 or more biosimilar prod3 uct applicants under subsection (k) that is 

4 contingent upon, provides a contingent 

5 condition for, or otherwise relates to an 

6 agreement described in clause (i); and 

7 ‘‘(iii) excludes any agreement that 

8 solely concerns— 

9 ‘‘(I) purchase orders for raw ma10 terial supplies; 

11 ‘‘(II) equipment and facility con12 tracts; 

13 ‘‘(III) employment or consulting 

14 contracts; or 

15 ‘‘(IV) packaging and labeling 

16 contracts. 

17 ‘‘(C) FILING.— 

18 ‘‘(i) IN GENERAL.—The text of an 

19 agreement required to be filed by subpara20 graph (A) shall be filed with the Assistant 

21 Attorney General and the Federal Trade 

22 Commission not later than— 

23 ‘‘(I) 10 business days after the 

24 date on which the agreement is exe25 cuted; and 


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1 ‘‘(II) prior to the date of the first 

2 commercial marketing of, for agree3 ments described in subparagraph 

4 (A)(i), the biosimilar product that is 

5 the subject of the application or, for 

6 agreements described in subparagraph 

7 (A)(ii), any biosimilar product that is 

8 the subject of an application described 

9 in such subparagraph. 

10 ‘‘(ii) IF AGREEMENT NOT REDUCED

11 TO TEXT.—If an agreement required to be 

12 filed by subparagraph (A) has not been re13 duced to text, the persons required to file 

14 the agreement shall each file written de15 scriptions of the agreement that are suffi16 cient to disclose all the terms and condi17 tions of the agreement. 

18 ‘‘(iii) CERTIFICATION.—The chief ex19 ecutive officer or the company official re20 sponsible for negotiating any agreement re21 quired to be filed by subparagraph (A) 

22 shall include in any filing under this para23 graph a certification as follows: ‘I declare 

24 under penalty of perjury that the following 

25 is true and correct: The materials filed 


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1 with the Federal Trade Commission and 

2 the Department of Justice under section 

3 351(l)(6) of the Public Health Service Act, 

4 with respect to the agreement referenced in 

5 this certification: (1) represent the com6 plete, final, and exclusive agreement be7 tween the parties; (2) include any ancillary 

8 agreements that are contingent upon, pro9 vide a contingent condition for, or are oth10 erwise related to, the referenced agree11 ment; and (3) include written descriptions 

12 of any oral agreements, representations, 

13 commitments, or promises between the 

14 parties that are responsive to such section 

15 and have not been reduced to writing.’. 

16 ‘‘(D) DISCLOSURE EXEMPTION.—Any in17 formation or documentary material filed with 

18 the Assistant Attorney General or the Federal 

19 Trade Commission pursuant to this paragraph 

20 shall be exempt from disclosure under section 

21 552 of title 5, United States Code, and no such 

22 information or documentary material may be 

23 made public, except as may be relevant to any 

24 administrative or judicial action or proceeding. 

25 Nothing in this subparagraph prevents discloVerDate Mar 15 2010 00:55 Jan 26, 2011 Jkt 099200 PO 00000 Frm 00213 Fmt 6652 Sfmt 6201 E:\BILLS\H397.IH H397

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1 sure of information or documentary material to 

2 either body of the Congress or to any duly au3 thorized committee or subcommittee of the Con4 gress. 

5 ‘‘(E) ENFORCEMENT.— 

6 ‘‘(i) CIVIL PENALTY.—Any person 

7 that violates a provision of this paragraph 

8 shall be liable for a civil penalty of not 

9 more than $11,000 for each day on which 

10 the violation occurs. Such penalty may be 

11 recovered in a civil action— 

12 ‘‘(I) brought by the United 

13 States; or 

14 ‘‘(II) brought by the Federal 

15 Trade Commission in accordance with 

16 the procedures established in section 

17 16(a)(1) of the Federal Trade Com18 mission Act. 

19 ‘‘(ii) COMPLIANCE AND EQUITABLE

20 RELIEF.—If any person violates any provi21 sion of this paragraph, the United States 

22 district court may order compliance, and 

23 may grant such other equitable relief as 

24 the court in its discretion determines nec25 essary or appropriate, upon application of 


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1 the Assistant Attorney General or the Fed2 eral Trade Commission. 

3 ‘‘(F) RULEMAKING.—The Federal Trade 

4 Commission, with the concurrence of the Assist5 ant Attorney General and by rule in accordance 

6 with section 553 of title 5, United States Code, 

7 consistent with the purposes of this para8 graph— 

9 ‘‘(i) may define the terms used in this 

10 paragraph; 

11 ‘‘(ii) may exempt classes of persons or 

12 agreements from the requirements of this 

13 paragraph; and 

14 ‘‘(iii) may prescribe such other rules 

15 as may be necessary and appropriate to 

16 carry out the purposes of this paragraph. 

17 ‘‘(G) SAVINGS CLAUSE.—Any action taken 

18 by the Assistant Attorney General or the Fed19 eral Trade Commission, or any failure of the 

20 Assistant Attorney General or the Commission 

21 to take action, under this paragraph shall not 

22 at any time bar any proceeding or any action 

23 with respect to any agreement between a bio24 similar product applicant under subsection (k) 

25 and the reference product sponsor, or any 


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1 agreement between biosimilar product appli2 cants under subsection (k), under any other 

3 provision of law, nor shall any filing under this 

4 paragraph constitute or create a presumption of 

5 any violation of any competition laws.’’. 

6 (b) DEFINITIONS.—Section 351(i) of the Public 

7 Health Service Act (42 U.S.C. 262(i)) is amended— 

8 (1) by striking ‘‘In this section, the term ‘bio9 logical product’ means’’ and inserting the following: 

10 ‘‘In this section: 

11 ‘‘(1) The term ‘biological product’ means’’; 

12 (2) in paragraph (1), as so designated, by in13 serting ‘‘protein (except any chemically synthesized 

14 polypeptide),’’ after ‘‘allergenic product,’’; and 

15 (3) by adding at the end the following: 

16 ‘‘(2) The term ‘biosimilar’ or ‘biosimilarity’, in 

17 reference to a biological product that is the subject 

18 of an application under subsection (k), means— 

19 ‘‘(A) that the biological product is highly 

20 similar to the reference product notwith21 standing minor differences in clinically inactive 

22 components; and 

23 ‘‘(B) there are no clinically meaningful dif24 ferences between the biological product and the 


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1 reference product in terms of the safety, purity, 

2 and potency of the product. 

3 ‘‘(3) The term ‘interchangeable’ or ‘inter4 changeability’, in reference to a biological product 

5 that is shown to meet the standards described in 

6 subsection (k)(4), means that the biological product 

7 may be substituted for the reference product without 

8 the intervention of the health care provider who pre9 scribed the reference product. 

10 ‘‘(4) The term ‘reference product’ means the 

11 single biological product licensed under subsection 

12 (a) against which a biological product is evaluated in 

13 an application submitted under subsection (k).’’. 

14 (c) PRODUCTS PREVIOUSLY APPROVED UNDER SEC15 TION 505.— 

16 (1) REQUIREMENT TO FOLLOW SECTION 351.— 

17 Except as provided in paragraph (2), an application 

18 for a biological product shall be submitted under 

19 section 351 of the Public Health Service Act (42 

20 U.S.C. 262) (as amended by this Act). 

21 (2) EXCEPTION.—An application for a biologi22 cal product may be submitted under section 505 of 

23 the Federal Food, Drug, and Cosmetic Act (21 

24 U.S.C. 355) if— 


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1 (A) such biological product is in a product 

2 class for which a biological product in such 

3 product class is the subject of an application 

4 approved under such section 505 not later than 

5 the date of enactment of this Act; and 

6 (B) such application— 

7 (i) has been submitted to the Sec8 retary of Health and Human Services (re9 ferred to in this Act as the ‘‘Secretary’’) 

10 before the date of enactment of this Act; 

11 or 

12 (ii) is submitted to the Secretary not 

13 later than the date that is 10 years after 

14 the date of enactment of this Act. 

15 (3) LIMITATION.—Notwithstanding paragraph 

16 (2), an application for a biological product may not 

17 be submitted under section 505 of the Federal Food, 

18 Drug, and Cosmetic Act (21 U.S.C. 355) if there is 

19 another biological product approved under sub20 section (a) of section 351 of the Public Health Serv21 ice Act that could be a reference product with re22 spect to such application (within the meaning of 

23 such section 351) if such application were submitted 

24 under subsection (k) of such section 351. 


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1 (4) DEEMED APPROVED UNDER SECTION 351.— 

2 An approved application for a biological product 

3 under section 505 of the Federal Food, Drug, and 

4 Cosmetic Act (21 U.S.C. 355) shall be deemed to be 

5 a license for the biological product under such sec6 tion 351 on the date that is 10 years after the date 

7 of enactment of this Act. 

8 (5) DEFINITIONS.—For purposes of this sub9 section, the term ‘‘biological product’’ has the mean10 ing given such term under section 351 of the Public 

11 Health Service Act (42 U.S.C. 262) (as amended by 

12 this Act). 

13 SEC. 702. FEES RELATING TO BIOSIMILAR BIOLOGICAL 

14 PRODUCTS. 

15 Subparagraph (B) of section 735(1) of the Federal 

16 Food, Drug, and Cosmetic Act (21 U.S.C. 379g(1)) is 

17 amended by inserting ‘‘, including licensure of a biological 

18 product under section 351(k) of such Act’’ before the pe19 riod at the end. 

20 SEC. 703. AMENDMENTS TO CERTAIN PATENT PROVISIONS. 

21 (a) Section 271(e)(2) of title 35, United States Code 

22 is amended— 

23 (1) in subparagraph (A), by striking ‘‘or’’ after 

24 ‘‘patent,’’; 


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1 (2) in subparagraph (B), by adding ‘‘or’’ after 

2 the comma at the end; 

3 (3) by inserting the following after subpara4 graph (B): 

5 ‘‘(C) a statement under section 

6 351(l)(4)(D)(ii) of the Public Health Service 

7 Act,’’; and 

8 (4) in the matter following subparagraph (C) 

9 (as added by paragraph (3)), by inserting before the 

10 period the following: ‘‘, or if the statement described 

11 in subparagraph (C) is provided in connection with 

12 an application to obtain a license to engage in the 

13 commercial manufacture, use, or sale of a biological 

14 product claimed in a patent or the use of which is 

15 claimed in a patent before the expiration of such 

16 patent’’. 

17 (b) Section 271(e)(4) of title 35, United States Code, 

18 is amended by striking ‘‘in paragraph (2)’’ in both places 

19 it appears and inserting ‘‘in paragraph (2)(A) or (2)(B)’’. 

Æ 


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