I 

109TH CONGRESS 

1ST SESSION H. R. 3056

To amend title I of the Employee Retirement Income Security Act of 1974 

to provide for the establishment in the Department of Labor of a Small 

Employer Health Benefits Program. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 24, 2005

Mr. ANDREWS (for himself and Mr. KIND) introduced the following bill; which 

was referred to the Committee on Education and the Workforce 

A BILL

To amend title I of the Employee Retirement Income Security Act of 1974 to provide for the establishment in 

the Department of Labor of a Small Employer Health 

Benefits Program.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Small Employer Health Act of 2005’’. 

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

7 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Establishment of Small Employer Health Benefits Program (SEHBP). 
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‘‘PART 8—SMALL EMPLOYER HEALTH BENEFITS PROGRAM (SEHBP) 

‘‘Sec. 801. Establishment of program. 

‘‘Sec. 802. Contracts with qualifying insurers. 

‘‘Sec. 803. Additional conditions. 

‘‘Sec. 804. Dissemination of information. 

‘‘Sec. 805. Subsidies. 

‘‘Sec. 806. Authorization of appropriations.

1 SEC. 2. ESTABLISHMENT OF SMALL EMPLOYER HEALTH 

2 BENEFITS PROGRAM (SEHBP). 

3 (a) IN GENERAL.—Subtitle B of title I of the Em4 ployee Retirement Income Security Act of 1974 is amend5 ed by adding after part 7 the following new part: 

6 ‘‘PART 8—SMALL EMPLOYER HEALTH BENEFITS 

7 PROGRAM (SEHBP) 

8 ‘‘SEC. 801. ESTABLISHMENT OF PROGRAM. 

9 ‘‘(a) IN GENERAL.—The Secretary shall establish, in 

10 accordance with this part, a program under which—

11 ‘‘(1) qualifying small employers (as defined in 

12 subsection (b)) are provided access to qualifying 

13 health insurance coverage (as defined in subsection 

14 (c)) for their employees, and 

15 ‘‘(2) such employees may elect alternative forms 

16 of coverage offered by various health insurance 

17 issuers. 

18 ‘‘(b) QUALIFYING SMALL EMPLOYER DEFINED; 

19 OTHER DEFINITIONS.—For purposes of this part: 

20 ‘‘(1) QUALIFYING SMALL EMPLOYER.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualifying 

2 small employer’ means a small employer (as de3 fined in paragraph (2)) that—

4 ‘‘(i) elects to offer health insurance 

5 coverage provided under this part to each 

6 employee who has been employed by that 

7 employer for 3 months or longer; and 

8 ‘‘(ii) elects, with respect to an em9 ployee electing coverage under qualified 

10 health insurance coverage, to pay at least 

11 50 percent of the total premium for quali12 fying health insurance coverage provided 

13 under this part. 

14 ‘‘(B) ELECTIONS.—Elections under sub15 paragraph (A) may be filed with the Secretary 

16 during the 180-day period beginning with the 

17 first enrollment period occurring under section 

18 803 and during open enrollment periods occur19 ring thereafter under such section. Such elec20 tions shall be filed in such form and manner as 

21 shall be prescribed by the Secretary. 

22 ‘‘(C) PART-TIME EMPLOYMENT.—Under 

23 regulations of the Secretary, in the case of an 

24 employee serving in a position in which service 

25 is customarily less than 1,500 hours per year, 
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1 the reference in subparagraph (A)(ii) to ‘50 

2 percent’ shall be deemed a percentage reduced 

3 to a percentage that bears the same ratio to 50 

4 percent as the number of hours of service per 

5 year customarily in such position bears to 

6 1,500. 

7 ‘‘(2) SMALL EMPLOYER.—The term ‘small em8 ployer’ means, with respect to a year, an employer 

9 who employed an average of fewer than 100 employ10 ees on business days during the preceding calendar 

11 year and who employs at least 1 employee on the 

12 first day of the year. 

13 ‘‘(3) SEHBP.—The term ‘SEHBP’ means the 

14 small employer health benefits program provided 

15 under this part. 

16 ‘‘(c) QUALIFYING HEALTH INSURANCE COVERAGE.—

17 For purposes of this part, the term ‘qualifying health in18 surance coverage’ means health insurance coverage that 

19 meets the following requirements: 

20 ‘‘(1) The coverage is offered by a health insur21 ance issuer. 

22 ‘‘(2) The benefits under such coverage are 

23 equivalent to or greater than the lower level of bene24 fits provided under the service benefit plan described 

25 in section 8903(1) of title 5, United States Code. 
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1 ‘‘(3) The coverage includes, with respect to an 

2 eligible individual that elects coverage, coverage of 

3 the same dependents that would be covered if the 

4 coverage were offered under FEHBP. 

5 ‘‘(4)(A) Subject to subparagraph (B), there is 

6 no underwriting, through a preexisting condition 

7 limitation, differential benefits, or different premium 

8 levels, or otherwise, with respect to such coverage for 

9 covered individuals or their dependents. 

10 ‘‘(B) The premiums charged for such coverage 

11 are community-rated for individuals within any 

12 State and may vary only—

13 ‘‘(i) by individual or family enrollment, and 

14 ‘‘(ii) to the extent permitted under the 

15 laws of such State relating to health insurance 

16 coverage offered in the small group market, on 

17 the basis of geography. 

18 ‘‘(d) OTHER TERMS.—

19 ‘‘(1) HEALTH INSURANCE COVERAGE; HEALTH

20 INSURANCE ISSUER; HEALTH STATUS-RELATED FAC21 TOR.—The terms ‘health insurance coverage’, ‘health 

22 insurance issuer’, ‘health status-related factor’ have 

23 the meanings provided such terms in section 733. 

24 ‘‘(2) SMALL GROUP MARKET.—The term ‘small 

25 group market’ has the meaning provided such term 
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1 in section 2791(e)(5) of the Public Health Service 

2 Act (42 U.S.C. 300gg–91(e)(5)). 

3 ‘‘(3) FEHBP.—The term ‘FEHBP’ means the 

4 Federal Employees Health Benefits Program under 

5 chapter 89 of title 5, United States Code. 

6 ‘‘(e) TREATMENT OF PARTNERSHIPS AND SELF-EM7 PLOYED INDIVIDUALS.—For purposes of this part, and for 

8 purposes of applying section 3 to this part and to part 

9 5 as it applies to this part, in any case in which qualifying 

10 health insurance coverage is, or is to be, provided under 

11 a plan, fund, or program to individuals covered there12 under—

13 ‘‘(1) if such plan, fund, or program is main14 tained by a partnership, the term ‘employer’ (as de15 fined in section 3(5)) includes the partnership in re16 lation to the partners, and the term ‘employee’ (as 

17 defined in section 3(6)) includes any partner in rela18 tion to the partnership; and 

19 ‘‘(2) if such plan, fund, or program is main20 tained by a self-employed individual, the term ‘em21 ployer’ (as defined in section 3(5)) and the term 

22 ‘employee’ (as defined in section 3(6)) shall include 

23 such individual. 
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1 ‘‘SEC. 802. CONTRACTS WITH QUALIFYING INSURERS. 

2 ‘‘(a) IN GENERAL.—The Secretary shall enter into 

3 contracts with health insurance issuers for the offering of 

4 qualifying health insurance coverage under this part in the 

5 States in such manner as to offer coverage to employees 

6 of employers that elect to offer coverage under this part. 

7 Nothing in this part shall be construed as requiring the 

8 Secretary to enter into arrangements with all such issuers 

9 seeking to offer qualifying health insurance coverage in 

10 a State. 

11 ‘‘(b) CONTINUED REGULATION.—Nothing in this 

12 part shall be construed as preempting State laws applica13 ble to health insurance issuers that offer coverage under 

14 this part in such State. 

15 ‘‘(c) COORDINATION WITH STATE INSURANCE COM16 MISSIONERS.—The Secretary shall coordinate with the in17 surance commissioners for the various States in estab18 lishing a process for handling and resolving any com19 plaints relating to health insurance coverage offered under 

20 this part, to the extent necessary to augment processes 

21 otherwise available under State law. 

22 ‘‘SEC. 803. ADDITIONAL CONDITIONS. 

23 ‘‘(a) LIMITATION ON ENROLLMENT PERIODS.—The 

24 Secretary may limit the periods of times during which em25 ployees may elect coverage offered under this part, but 

26 such election shall be consistent with the elections per-
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1 mitted for employees under FEHBP and shall provide for 

2 at least annual open enrollment periods and enrollment 

3 at the time of initial eligibility to enroll and upon appro4 priate changes in family circumstances. 

5 ‘‘(b) AUTHORIZING USE OF STATES IN MAKING AR6 RANGEMENTS FOR COVERAGE.—In lieu of the coverage 

7 otherwise arranged by the Secretary under this part, the 

8 Secretary may enter an arrangement with a State under 

9 which a State arranges for the provision of qualifying 

10 health insurance coverage to qualifying small employers 

11 in such manner as the Secretary would otherwise arrange 

12 for such coverage. 

13 ‘‘(c) USE OF FEHBP MODEL.—The Secretary shall 

14 carry out the SEHBP using the model of the FEHBP 

15 to the extent practicable and consistent with the provisions 

16 of this part, and, in carrying out such model, the Secretary 

17 shall, to the maximum extent practicable, negotiate the 

18 most affordable and substantial coverage possible for 

19 small employers. 

20 ‘‘SEC. 804. DISSEMINATION OF INFORMATION. 

21 ‘‘The Secretary shall widely disseminate information 

22 about SEHBP through the media, the Internet, public 

23 service announcements, and other employer and employee 

24 directed communications. 
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1 ‘‘SEC. 805. SUBSIDIES. 

2 ‘‘(a) EMPLOYER SUBSIDIES.—

3 ‘‘(1) ENROLLMENT DISCOUNT.—

4 ‘‘(A) IN GENERAL.—In the case of a quali5 fying small employer who is eligible under sub6 paragraph (B), the portion of the total pre7 mium for coverage otherwise payable by such 

8 employer under this part shall be reduced by 5 

9 percent. Such reduction shall not cause an in10 crease in the portion of the total premium pay11 able by employees. 

12 ‘‘(B) EMPLOYERS ELIGIBLE FOR DIS13 COUNTS.—A qualifying small employer is eligi14 ble under this subparagraph if such employer 

15 employed an average of fewer than 25 employ16 ees on business days during the preceding cal17 endar year. 

18 ‘‘(2) EMPLOYER PREMIUM SUBSIDY.—

19 ‘‘(A) IN GENERAL.—The Secretary shall 

20 provide to qualifying small employers who are 

21 eligible under subparagraph (C) and who elect 

22 to offer health insurance coverage under this 

23 part a subsidy for premiums paid by the em24 ployer for coverage of employees whose indi25 vidual income (as determined by the Secretary) 

26 is at or below 200 percent of the poverty line 
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1 (as defined in section 673(2) of the Community 

2 Services Block Grant Act (42 U.S.C. 9902(2)), 

3 including any revision required by such section) 

4 for an individual. 

5 ‘‘(B) SUBSIDY SCALED ACCORDING TO

6 SIZE OF EMPLOYER.—The subsidy provided 

7 under subparagraph (A) shall be designed so 

8 that the subsidy equals, for any calendar year—

9 ‘‘(i) 50 percent of the portion of the 

10 premium payable by the employer for the 

11 coverage, in the case of eligible qualifying 

12 small employers who employ an average of 

13 fewer than 11 employees on business days 

14 during the preceding calendar year; 

15 ‘‘(ii) 35 percent of the portion of the 

16 premium payable by the employer for the 

17 coverage, in the case of eligible qualifying 

18 small employers who employ an average of 

19 more than 10 employees but fewer than 26 

20 employees on business days during the pre21 ceding calendar year; and 

22 ‘‘(iii) 25 percent of the portion of the 

23 premium payable by the employer for the 

24 coverage, in the case of eligible qualifying 

25 small employers who employ an average of 
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1 more than 25 employees but fewer than 51 

2 employees on business days during the pre3 ceding calendar year. 

4 ‘‘(C) EMPLOYERS ELIGIBLE FOR PREMIUM

5 SUBSIDY.—A qualifying small employer is eligi6 ble under this subparagraph if such employer 

7 employed an average of fewer than 50 employ8 ees on business days during the preceding cal9 endar year. 

10 ‘‘(b) EMPLOYEE SUBSIDIES.—

11 ‘‘(1) IN GENERAL.—The Secretary shall provide 

12 subsidies to employees whose family income (as de13 termined by the Secretary) is at or below 200 per14 cent of the poverty line (as defined in section 673(2) 

15 of the Community Services Block Grant Act (42 

16 U.S.C. 9902(2)), including any revision required by 

17 such section) for a family of the size involved. 

18 ‘‘(2) AMOUNT OF SUBSIDY.—Such subsidies 

19 shall be in an amount equal to the excess of the por20 tion of the total premium for coverage otherwise 

21 payable by the employee under this part for any pe22 riod, over 5 percent of the family income (as deter23 mined under paragraph (1)(A)) of the employee for 

24 such period. 
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1 ‘‘(3) COORDINATION OF SUBSIDIES.—Notwith2 standing paragraph (1), under regulations of the 

3 Secretary, an employee may be entitled to subsidies 

4 under this subsection for any period only if such em5 ployee is not eligible for subsidies for such period 

6 under any Federal or State health insurance subsidy 

7 program (including a program under title V, XIX, or 

8 XXI of the Social Security Act). For purposes of 

9 this paragraph, an employee is ‘eligible’ for a sub10 sidy under a program if such employee is entitled to 

11 such subsidy or would, upon filing application there12 fore, be entitled to such subsidy. 

13 ‘‘(4) AUTHORITY TO EXPAND ELIGIBILITY.—

14 The Secretary may, to the extent of available fund15 ing, provide for expansion of the subsidy program 

16 under this subsection to employees whose family in17 come (as defined by the Secretary) is at or below 

18 300 percent of the poverty line (as determined under 

19 paragraph (1)). 

20 ‘‘(c) PROCEDURES.—The Secretary shall establish by 

21 regulation applications, methods, and procedures for car22 rying out this section, including measures to ascertain or 

23 confirm levels of income. 
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1 ‘‘SEC. 806. AUTHORIZATION OF APPROPRIATIONS. 

2 ‘‘There are authorized to be appropriated, for the pe3 riod beginning with fiscal year 2006 and ending with fiscal 

4 year 2015, $50,000,000,000 to carry out this part, includ5 ing the establishment of subsidies under section 805.’’. 

6 (b) REPORT ON OFFERING NATIONAL HEALTH

7 PLANS.—Not later than 18 months after the date of the 

8 enactment of this Act, the Secretary of Labor shall report 

9 to Congress the Secretary’s recommendations regarding 

10 the feasibility of offering national health plans under part 

11 8 of subtitle B of title I of the Employee Retirement In12 come Security Act of 1974, as added by subsection (a). 

13 (c) CLERICAL AMENDMENT.—The table of contents 

14 in section 1 of the Employee Retirement Income Security 

15 Act of 1974 is amended by inserting after the item relat16 ing to section 734 the following new items: 

‘‘PART 8—SMALL EMPLOYER HEALTH BENEFITS PROGRAM (SEHBP) 

‘‘801. Establishment of program. 

‘‘802. Contracts with qualifying insurers. 

‘‘803. Additional conditions. 

‘‘804. Dissemination of information. 

‘‘805. Subsidies. 

‘‘806. Authorization of appropriations.’’. 

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