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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3423 Introduced in House (IH)]

108th CONGRESS
  1st Session
                                H. R. 3423

   To amend the Internal Revenue Code of 1986 to allow individuals a 
  refundable credit against income tax for health insurance costs, to 
  allow employees who elect not to participate in employer subsidized 
 health plans an exclusion from gross income for employer payments in 
          lieu of such participation, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            October 30, 2003

 Mr. Shadegg introduced the following bill; which was referred to the 
Committee on Energy and Commerce, and in addition to the Committees on 
  Education and the Workforce, and Ways and Means, 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 amend the Internal Revenue Code of 1986 to allow individuals a 
  refundable credit against income tax for health insurance costs, to 
  allow employees who elect not to participate in employer subsidized 
 health plans an exclusion from gross income for employer payments in 
          lieu of such participation, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Patients' Health 
Care Choice Act of 2003''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Purposes.
                          TITLE I--HEALTHMARTS

Sec. 101. Expansion of consumer choice through Healthmarts.
 TITLE II--HEALTH CARE ACCESS AND CHOICE THROUGH INDIVIDUAL MEMBERSHIP 
                          ASSOCIATIONS (IMAs)

Sec. 201. Expansion of access and choice through individual membership 
                            associations (IMAs).
  TITLE III--FEDERAL MATCHING FUNDING FOR STATE INSURANCE EXPENDITURES

Sec. 301. Federal matching funding for State insurance expenditures.
 TITLE IV--AFFORDABLE HEALTH COVERAGE FOR EMPLOYEES OF SMALL BUSINESSES

Sec. 401. Short title of title.
Sec. 402. Rules.
Sec. 403. Clarification of treatment of single employer arrangements.
Sec. 404. Clarification of treatment of certain collectively bargained 
                            arrangements.
Sec. 405. Enforcement provisions.
Sec. 406. Cooperation between Federal and State authorities.
Sec. 407. Effective date and transitional and other rules.
        TITLE V--IMPROVEMENT TO ACCESS AND CHOICE OF HEALTH CARE

Sec. 501. Refundable credit for health insurance costs.
Sec. 502. Exclusion for employer payments made to compensate employees 
                            who elect not to participate in employer-
                            subsidized health plans.
Sec. 503. Expanded availability of medical savings accounts.
                TITLE VI--PATIENT ACCESS TO INFORMATION

Sec. 601. Patient access to information regarding plan coverage, 
                            managed care procedures, health care 
                            providers, and quality of medical care.
Sec. 602. Effective date.
    (c) Constitutional Authority To Enact This Legislation.--The 
constitutional authority upon which this Act rests is the power of 
Congress to regulate commerce with foreign nations and among the 
several States, set forth in article I, section 8 of the United States 
Constitution.

SEC. 2. FINDINGS.

    (a) Need for Structural Reforms.--Congress finds that the majority 
of Americans are receiving health care of a quality unmatched elsewhere 
in the world but that the method by which health care currently is 
financed and delivered is inflationary and does not distribute quality 
care to all Americans. Congress further finds that the major structural 
reforms must be implemented in order to institute a competitive system 
based on individual choice, under which each American is permitted 
individual choice to select the method of health care delivery which he 
believes is most appropriate for himself and his family, with 
appropriate assistance from the United States Government. Such a system 
would introduce internal incentives for the cost-effective delivery of 
quality health care to the American people.
    (b) Specific Deficiencies.--Congress finds that the major 
deficiencies of the present method of delivering and financing health 
care as follows:
            (1) Employer ownership of health benefits.--The biggest 
        problem with health care today is that the tax code has 
        encouraged employers, not individuals, to become the purchaser 
        of health insurance. Employers have a tax incentive to offer 
        health care benefits to their employees, which means that 
        employers are truly the owner of the plan, not individuals. 
        Therefore employees, who are the consumers of health care 
        services are unconcerned with and not involved with issues of 
        cost and overutilize health care services in the belief that 
        such services are ``free''.
            (2) Insufficient access.--Numerous persons are not able to 
        obtain sufficient health care either because the necessary 
        personnel and facilities are not located in their communities 
        or because they do not have adequate financial resources to 
        obtain such services, or both.
            (3) Excessive government regulation.--Continually 
        increasing and complex Government regulation of the economic 
        aspects of the health care delivery system has proven 
        ineffective in restraining costs and is itself expensive and 
        counterproductive in fulfilling its purposes and detrimental to 
        the care of patients.
            (4) Third-party payment systems.--Payment by third-party 
        payers (including commercial insurance companies and various 
        levels of government) for the preponderance of the health care 
        delivered each year insulates patients, as well as physicians, 
        hospitals, and other deliverers of health care, from the need 
        to consider the cost of treatment in addition to the medical 
        benefit expected from it.
            (5) Reasonable cost reimbursement.--Reimbursement of 
        hospitals and other health care institutions by third-party 
        payers on the basis of reasonable costs of operation provides 
        these institutions insufficient incentives to introduce more 
        efficient methods of delivering care and at the same time 
        diminishes the extent to which these institutions and their 
        patients are affected by the consequences of inefficiency and 
        overexpansion.
            (6) Government and third-party payer.--The present role of 
        government as a third-party payer poses a conflict of interest 
        whereby the Government purchases or finances health care 
        services and unilaterally determines the amount the deliverer 
        will be paid for those services.
            (7) Lack of competition.--The present system of financing 
        and regulation prevents health care deliverers from competing 
        with each other on the basis of efficiency and price as well as 
        quality.

SEC. 3. PURPOSES.

    The purposes of Act are--
            (1) to make it possible for individuals, employees, and the 
        self-employed to purchase and own their own health insurance 
        without suffering any negative tax consequences;
            (2) to enable individuals to make their own informed choice 
        of the method by which their health care is provided, the 
        persons who deliver it, and the price they wish to pay for it;
            (3) to assist individuals in obtaining and in paying for 
        basic health care services;
            (4) to render patients and deliverers sensitive to the cost 
        of health care, giving them both the incentive and the ability 
        to restrain undesired increases in health care costs;
            (5) to simplify and rationalize the payment mechanism for 
        health care services;
            (6) to foster the development of numerous, varied, and 
        innovative systems of providing health care which will compete 
        against each other in terms of price, service, and quality, and 
        thus allow the American people to benefit from competitive 
        forces which will reward efficient and effective deliverers and 
        eliminate those which provide unsatisfactory quality of care or 
        are inefficient;
            (7) to replace governmental regulation of the economic 
        aspects of health care delivery with individual choice, private 
        initiative, and marketplace incentives and disciplines;
            (8) to encourage the development of systems of delivering 
        health care which are capable of supplying a broad range of 
        health care services in a comprehensive and systematic manner, 
        and
            (9) to preserve the independence of health care deliverers 
        and encourage their close identification with and their 
        accountability to the individuals they serve.

                          TITLE I--HEALTHMARTS

SEC. 101. EXPANSION OF CONSUMER CHOICE THROUGH HEALTHMARTS.

    The Public Health Service Act is amended by adding at the end the 
following new title:

                       ``TITLE XXIX--HEALTHMARTS

``SEC. 2901. DEFINITION OF HEALTHMART.

    ``(a) In General.--For purposes of this title, the term 
`HealthMart' means a legal entity that meets the following 
requirements:
            ``(1) Organization.--The HealthMart is an organization 
        operated under the direction of a board of directors which is 
        composed of representatives of not fewer than 2 from each of 
        the following:
                    ``(A) Employers.
                    ``(B) Employees.
                    ``(C) Individuals (other than those described in 
                subparagraph (B)) who are eligible to participate in 
                the HealthMart.
                    ``(D) Health care providers, which may be 
                physicians, other health care professionals, health 
                care facilities, or any combination thereof.
                    ``(E) Entities, such as insurance companies, health 
                maintenance organizations, and licensed provider-
                sponsored organizations, that underwrite or administer 
                health benefits coverage.
            ``(2) Offering health benefits coverage.--
                    ``(A) Different groups.--The HealthMart, in 
                conjunction with those health insurance issuers that 
                offer health benefits coverage through the HealthMart, 
                makes available health benefits coverage in the manner 
                described in subsection (b) to all employers, eligible 
                employees, and individuals in the manner described in 
                subsection (c)(2) at rates (including employer's and 
                employee's share, if applicable) that are established 
                by the health insurance issuer on a policy or product 
                specific basis and that may vary only as permissible 
                under State law. A HealthMart is deemed to be a group 
                health plan for purposes of applying section 702 of the 
                Employee Retirement Income Security Act of 1974, 
                section 2702 of this Act, and section 9802(b) of the 
                Internal Revenue Code of 1986 (which limit variation 
                among similarly situated individuals of required 
                premiums for health benefits coverage on the basis of 
                health status-related factors).
                    ``(B) Nondiscrimination in coverage offered.--
                            ``(i) In general.--Subject to clause (ii), 
                        the HealthMart may not offer health benefits 
                        coverage to an eligible employee or individual 
                        in a geographic area (as specified under 
                        paragraph (3)(A)) unless the same coverage is 
                        offered to all such employees or individuals in 
                        the same geographic area. Section 2711(a)(1)(B) 
                        of this Act limits denial of enrollment of 
                        certain eligible individuals under health 
                        benefits coverage in the small group market.
                            ``(ii) Construction.--Nothing in this title 
                        shall be construed as requiring or permitting a 
                        health insurance issuer to provide coverage 
                        outside the service area of the issuer, as 
                        approved under State law.
                    ``(C) No financial underwriting.--The HealthMart 
                provides health benefits coverage only through 
                contracts with health insurance issuers and does not 
                assume insurance risk with respect to such coverage.
                    ``(D) Minimum coverage.--By the end of the first 
                year of its operation and thereafter, the HealthMart 
                maintains not fewer than 10 purchasers and 100 members.
            ``(3) Geographic areas.--
                    ``(A) Specification of geographic areas.--The 
                HealthMart shall specify the geographic area (or areas) 
                in which it makes available health benefits coverage 
                offered by health insurance issuers to employers, or 
                individuals, as the case may be. Any such area shall 
                encompass at least one entire county or equivalent 
                area.
                    ``(B) Multistate areas.--In the case of a 
                HealthMart that serves more than one State, such 
                geographic areas may be areas that include portions of 
                two or more contiguous States.
                    ``(C) Multiple healthmarts permitted in single 
                geographic area.--Nothing in this title shall be 
                construed as preventing the establishment and operation 
                of more than one HealthMart in a geographic area or as 
                limiting the number of HealthMarts that may operate in 
                any area.
            ``(4) Provision of administrative services to purchasers.--
                    ``(A) In general.--The HealthMart provides 
                administrative services for purchasers. Such services 
                may include accounting, billing, enrollment 
                information, and employee coverage status reports.
                    ``(B) Construction.--Nothing in this subsection 
                shall be construed as preventing a HealthMart from 
                serving as an administrative service organization to 
                any entity.
            ``(5) Dissemination of information.--The HealthMart 
        collects and disseminates (or arranges for the collection and 
        dissemination of) consumer-oriented information on the scope, 
        cost, and enrollee satisfaction of all coverage options offered 
        through the HealthMart to its members and eligible individuals. 
        Such information shall be defined by the HealthMart and shall 
        be in a manner appropriate to the type of coverage offered. To 
        the extent practicable, such information shall include 
        information on provider performance, locations and hours of 
        operation of providers, outcomes, and similar matters. Nothing 
        in this section shall be construed as preventing the 
        dissemination of such information or other information by the 
        HealthMart or by health insurance issuers through electronic or 
        other means.
            ``(6) Filing information.--The HealthMart--
                    ``(A) files with the applicable Federal authority 
                information that demonstrates the HealthMart's 
                compliance with the applicable requirements of this 
                title; or
                    ``(B) in accordance with rules established under 
                section 2903(a), files with a State such information as 
                the State may require to demonstrate such compliance.
    ``(b) Health Benefits Coverage Requirements.--
            ``(1) Compliance with consumer protection requirements.--
        Any health benefits coverage offered through a HealthMart 
        shall--
                    ``(A) be underwritten by a health insurance issuer 
                that--
                            ``(i) is licensed (or otherwise regulated) 
                        under State law,
                            ``(ii) meets all applicable State standards 
                        relating to consumer protection, subject to 
                        section 2902(b), and
                            ``(iii) offers the coverage under a 
                        contract with the HealthMart;
                    ``(B) subject to paragraph (2), be approved or 
                otherwise permitted to be offered under State law; and
                    ``(C) provide full portability of creditable 
                coverage for individuals who remain members of the same 
                HealthMart notwithstanding that they change the 
                employer through which they are members in accordance 
                with the provisions of the parts 6 and 7 of subtitle B 
                of title I of the Employee Retirement Income Security 
Act of 1974 and titles XXII and XXVII of this Act, so long as both 
employers are purchasers in the HealthMart, and notwithstanding that 
they terminate such employment, if the HealthMart permits enrollment 
directly by eligible individuals.
            ``(2) Alternative process for approval of health benefits 
        coverage in case of discrimination or delay.--
                    ``(A) In general.--The requirement of paragraph 
                (1)(B) shall not apply to a policy or product of health 
                benefits coverage offered in a State if the health 
                insurance issuer seeking to offer such policy or 
                product files an application to waive such requirement 
                with the applicable Federal authority, and the 
                authority determines, based on the application and 
                other evidence presented to the authority, that--
                            ``(i) either (or both) of the grounds 
                        described in subparagraph (B) for approval of 
                        the application has been met; and
                            ``(ii) the coverage meets the applicable 
                        State standards (other than those that have 
                        been preempted under section 2902).
                    ``(B) Grounds.--The grounds described in this 
                subparagraph with respect to a policy or product of 
                health benefits coverage are as follows:
                            ``(i) Failure to act on policy, product, or 
                        rate application on a timely basis.--The State 
                        has failed to complete action on the policy or 
                        product (or rates for the policy or product) 
                        within 90 days of the date of the State's 
                        receipt of a substantially complete 
                        application. No period before the date of the 
                        enactment of this section shall be included in 
                        determining such 90-day period.
                            ``(ii) Denial of application based on 
                        discriminatory treatment.--The State has denied 
                        such an application and--
                                    ``(I) the standards or review 
                                process imposed by the State as a 
                                condition of approval of the policy or 
                                product imposes either any material 
                                requirements, procedures, or standards 
                                to such policy or product that are not 
                                generally applicable to other policies 
                                and products offered or any 
                                requirements that are preempted under 
                                section 2902; or
                                    ``(II) the State requires the 
                                issuer, as a condition of approval of 
                                the policy or product, to offer any 
                                policy or product other than such 
                                policy or product.
                    ``(C) Enforcement.--In the case of a waiver granted 
                under subparagraph (A) to an issuer with respect to a 
                State, the Secretary may enter into an agreement with 
                the State under which the State agrees to provide for 
                monitoring and enforcement activities with respect to 
                compliance of such an issuer and its health insurance 
                coverage with the applicable State standards described 
                in subparagraph (A)(ii). Such monitoring and 
                enforcement shall be conducted by the State in the same 
                manner as the State enforces such standards with 
                respect to other health insurance issuers and plans, 
                without discrimination based on the type of issuer to 
                which the standards apply. Such an agreement shall 
                specify or establish mechanisms by which compliance 
                activities are undertaken, while not lengthening the 
                time required to review and process applications for 
                waivers under subparagraph (A).
            ``(3) Examples of types of coverage.--The benefits coverage 
        made available through a HealthMart may include, but is not 
        limited to, any of the following if it meets the other 
        applicable requirements of this title:
                    ``(A) Coverage through a health maintenance 
                organization.
                    ``(B) Coverage in connection with a preferred 
                provider organization.
                    ``(C) Coverage in connection with a licensed 
                provider-sponsored organization.
                    ``(D) Indemnity coverage through an insurance 
                company.
                    ``(E) Coverage offered in connection with a 
                contribution into a medical savings account or flexible 
                spending account.
                    ``(F) Coverage that includes a point-of-service 
                option.
                    ``(G) Any combination of such types of coverage.
            ``(4) Wellness bonuses for health promotion.--Nothing in 
        this title shall be construed as precluding a health insurance 
        issuer offering health benefits coverage through a HealthMart 
        from establishing premium discounts or rebates for members or 
        from modifying otherwise applicable copayments or deductibles 
        in return for adherence to programs of health promotion and 
        disease prevention so long as such programs are agreed to in 
        advance by the HealthMart and comply with all other provisions 
        of this title and do not discriminate among similarly situated 
        members.
    ``(c) Purchasers; Members; Health Insurance Issuers.--
            ``(1) Purchasers.--
                    ``(A) In general.--Subject to the provisions of 
                this title, a HealthMart shall permit any employer or 
                any individual described in subsection (a)(1)(C) to 
                contract with the HealthMart for the purchase of health 
                benefits coverage for its employees and dependents of 
                those employees or for the individual (and the 
                individual's dependents), respectively, and may not 
                vary conditions of eligibility (including premium rates 
                and membership fees) of an employer or individual to be 
                a purchaser.
                    ``(B) Role of associations, brokers, and licensed 
                health insurance agents.--Nothing in this section shall 
                be construed as preventing an association, broker, 
                licensed health insurance agent, or other entity from 
                assisting or representing a HealthMart or employers or 
                individuals from entering into appropriate arrangements 
                to carry out this title.
                    ``(C) Period of contract.--The HealthMart may not 
                require a contract under subparagraph (A) between a 
                HealthMart and a purchaser to be effective for a period 
                of longer than 24 months. The previous sentence shall 
                not be construed as preventing such a contract from 
                being extended for additional 24-month periods or 
                preventing the purchaser from voluntarily electing a 
                contract period of longer than 24 months.
                    ``(D) Exclusive nature of contract.--
                            ``(i) In general.--Subject to clause (ii), 
                        such a contract shall provide that the 
                        purchaser agrees not to obtain or sponsor 
                        health benefits coverage, on behalf of 
any eligible employees (and their dependents), other than through the 
HealthMart.
                            ``(ii) Exception if no coverage offered in 
                        area of residences.--Clause (i) shall not apply 
                        to an eligible individual who resides in an 
                        area for which no coverage is offered by any 
                        health insurance issuer through the HealthMart.
                            ``(iii) Nothing precluding individual 
                        employee opt-out.--Nothing in this subparagraph 
                        shall be construed as requiring an eligible 
                        employee of a large or small employer that is a 
                        purchaser to obtain health benefits coverage 
                        through the HealthMart.
            ``(2) Members.--
                    ``(A) In general.--
                            ``(i) Employment based membership.--Under 
                        rules established to carry out this title, with 
                        respect to an employer that has a purchaser 
                        contract with a HealthMart, individuals who are 
                        employees of the employer may enroll for health 
                        benefits coverage (including coverage for 
                        dependents of such enrolling employees) offered 
                        by a health insurance issuer through the 
                        HealthMart.
                            ``(ii) Individuals.--Under rules 
                        established to carry out this title, with 
                        respect to an individual who has a purchaser 
                        contract with a HealthMart for himself or 
                        herself, the individual may enroll for health 
                        benefits coverage (including coverage for 
                        dependents of such individual) offered by a 
                        health insurance issuer through the HealthMart.
                    ``(B) Nondiscrimination in enrollment.--A 
                HealthMart may not deny enrollment as a member to an 
                individual who is an employee or individual (or 
                dependent of such an employee or individual) eligible 
                to be so enrolled based on health status-related 
                factors, except as may be permitted consistent with 
                section 2742(b).
                    ``(C) Annual open enrollment period.--In the case 
                of members enrolled in health benefits coverage offered 
                by a health insurance issuer through a HealthMart, 
                subject to subparagraph (D), the HealthMart shall 
                provide for an annual open enrollment period of 30 days 
                during which such members may change the coverage 
                option in which the members are enrolled.
                    ``(D) Rules of eligibility.--Nothing in this 
                paragraph shall preclude a HealthMart from establishing 
                rules of employee or individual eligibility for 
                enrollment and reenrollment of members during the 
                annual open enrollment period under subparagraph (C). 
                Such rules shall be applied consistently to all 
                purchasers and members within the HealthMart and shall 
                not be based in any manner on health status-related 
                factors and may not conflict with sections 2701 and 
                2702 of this Act.
            ``(3) Health insurance issuers.--
                    ``(A) Premium collection.--The contract between a 
                HealthMart and a health insurance issuer shall provide, 
                with respect to a member enrolled with health benefits 
                coverage offered by the issuer through the HealthMart, 
                for the payment of the premiums collected by the 
                HealthMart (or the issuer) for such coverage (less a 
                pre-determined administrative charge negotiated by the 
                HealthMart and the issuer) to the issuer.
                    ``(B) Scope of service area.--Nothing in this title 
                shall be construed as requiring the service area of a 
                health insurance issuer with respect to health 
                insurance coverage to cover the entire geographic area 
                served by a HealthMart.
                    ``(C) Availability of coverage options.--
                            ``(i) In general.--A HealthMart shall enter 
                        into contracts with one or more health 
                        insurance issuers in a manner that assures that 
                        at least 2 health insurance coverage options 
                        are made available.
                            ``(ii) Requirement of non-network option.--
                        At least one of the health insurance coverage 
                        options made available under clause (i) shall 
                        be a non-network coverage option under which 
                        enrollees may obtain benefits for health care 
                        items and services that are not provided under 
                        a contract between the provider of the service 
                        and the issuer involved.
    ``(d) Prevention of Conflicts of Interest.--
            ``(1) For boards of directors.--A member of a board of 
        directors of a HealthMart may not serve as an employee or paid 
        consultant to the HealthMart, but may receive reasonable 
        reimbursement for travel expenses for purposes of attending 
        meetings of the board or committees thereof.
            ``(2) For boards of directors or employees.--An individual 
        is not eligible to serve in a paid or unpaid capacity on the 
        board of directors of a HealthMart or as an employee of the 
        HealthMart, if the individual is employed by, represents in any 
        capacity, owns, or controls any ownership interest in an 
        organization from whom the HealthMart receives contributions, 
        grants, or other funds not connected with a contract for 
        coverage through the HealthMart.
            ``(3) Employment and employee representatives.--
                    ``(A) In general.--An individual who is serving on 
                a board of directors of a HealthMart as a 
                representative described in subparagraph (A) or (B) of 
                section 2901(a)(1) shall not be employed by or 
                affiliated with a health insurance issuer or be 
                licensed as or employed by or affiliated with a health 
                care provider.
                    ``(B) Construction.--For purposes of subparagraph 
                (A), the term ``affiliated'' does not include 
                membership in a health benefits plan or the obtaining 
                of health benefits coverage offered by a health 
                insurance issuer.
    ``(e) Construction.--
            ``(1) Network of affiliated healthmarts.--Nothing in this 
        section shall be construed as preventing one or more 
        HealthMarts serving different areas (whether or not contiguous) 
        from providing for some or all of the following (through a 
        single administrative organization or otherwise):
                    ``(A) Coordinating the offering of the same or 
                similar health benefits coverage in different areas 
                served by the different HealthMarts.
                    ``(B) Providing for crediting of deductibles and 
                other cost-sharing for individuals who are provided 
                health benefits coverage through the HealthMarts (or 
                affiliated HealthMarts) after--
                            ``(i) a change of employers through which 
                        the coverage is provided, or
                            ``(ii) a change in place of employment to 
                        an area not served by the previous HealthMart.
            ``(2) Permitting healthmarts to adjust distributions among 
        issuers to reflect relative risk of enrollees.--Nothing in this 
        section shall be construed as precluding a HealthMart from 
        providing for adjustments in amounts distributed among the 
        health insurance issuers offering health benefits coverage 
        through the HealthMart based on factors such as the relative 
        health care risk of members enrolled under the coverage offered 
        by the different issuers.

``SEC. 2902. APPLICATION OF CERTAIN LAWS AND REQUIREMENTS.

    ``(a) Authority of States.--Nothing in this section shall be 
construed as preempting State laws relating to the following:
            ``(1) The regulation of underwriters of health coverage, 
        including licensure and solvency requirements.
            ``(2) The application of premium taxes and required 
        payments for guaranty funds or for contributions to high-risk 
        pools.
            ``(3) The application of fair marketing requirements and 
        other consumer protections (other than those specifically 
        relating to an item described in subsection (b)).
            ``(4) The application of requirements relating to the 
        adjustment of rates for health insurance coverage.
    ``(b) Treatment of Benefit and Grouping Requirements.--State laws 
insofar as they relate to any of the following are superseded and shall 
not apply to health benefits coverage made available through a 
HealthMart:
            ``(1) Benefit requirements for health benefits coverage 
        offered through a HealthMart, including (but not limited to) 
        requirements relating to coverage of specific providers, 
        specific services or conditions, or the amount, duration, or 
        scope of benefits, but not including requirements to the extent 
        required to implement title XXVII or other Federal law and to 
        the extent the requirement prohibits an exclusion of a specific 
        disease from such coverage.
            ``(2) Requirements (commonly referred to as fictitious 
        group laws) relating to grouping and similar requirements for 
        such coverage to the extent such requirements impede the 
        establishment and operation of HealthMarts pursuant to this 
        title.
            ``(3) Any other requirements (including limitations on 
        compensation arrangements) that, directly or indirectly, 
        preclude (or have the effect of precluding) the offering of 
        such coverage through a HealthMart, if the HealthMart meets the 
        requirements of this title.
Any State law or regulation relating to the composition or organization 
of a HealthMart is preempted to the extent the law or regulation is 
inconsistent with the provisions of this title.
    ``(c) Application of ERISA Fiduciary and Disclosure Requirements.--
The board of directors of a HealthMart is deemed to be a plan 
administrator of an employee welfare benefit plan which is a group 
health plan for purposes of applying parts 1 and 4 of subtitle B of 
title I of the Employee Retirement Income Security Act of 1974 and 
those provisions of part 5 of such subtitle which are applicable to 
enforcement of such parts 1 and 4, and the HealthMart shall be treated 
as such a plan and the enrollees enrolled on the basis of employment 
shall be treated as participants and beneficiaries for purposes of 
applying such provisions pursuant to this subsection.
    ``(d) Application of ERISA Renewability Protection.--A HealthMart 
is deemed to be group health plan that is a multiple employer welfare 
arrangement for purposes of applying section 703 of the Employee 
Retirement Income Security Act of 1974.
    ``(e) Application of Rules for Network Plans and Financial 
Capacity.--The provisions of subsections (c) and (d) of section 2711 
apply to health benefits coverage offered by a health insurance issuer 
through a HealthMart.
    ``(f) Construction Relating to Offering Requirement.--Nothing in 
section 2711(a) of this Act or 703 of the Employee Retirement Income 
Security Act of 1974 shall be construed as permitting the offering 
outside the HealthMart of health benefits coverage that is only made 
available through a HealthMart under this section because of the 
application of subsection (b).
    ``(g) Application to Guaranteed Renewability Requirements in Case 
of Discontinuation of an Issuer.--For purposes of applying section 2712 
in the case of health insurance coverage offered by a health insurance 
issuer through a HealthMart, if the contract between the HealthMart and 
the issuer is terminated and the HealthMart continues to make available 
any health insurance coverage after the date of such termination, the 
following rules apply:
            ``(1) Renewability.--The HealthMart shall fulfill the 
        obligation under such section of the issuer renewing and 
        continuing in force coverage by offering purchasers (and 
        members and their dependents) all available health benefits 
        coverage that would otherwise be available to similarly-
        situated purchasers and members from the remaining 
        participating health insurance issuers in the same manner as 
        would be required of issuers under section 2712(c).
            ``(2) Application of association rules.--The HealthMart 
        shall be considered an association for purposes of applying 
        section 2712(e).
    ``(h) Construction in Relation to Certain Other Laws.--Nothing in 
this title shall be construed as modifying or affecting the 
applicability to HealthMarts or health benefits coverage offered by a 
health insurance issuer through a HealthMart of parts 6 and 7 of 
subtitle B of title I of the Employee Retirement Income Security Act of 
1974 or titles XXII and XXVII of this Act.

``SEC. 2903. ADMINISTRATION.

    ``(a) In General.--The applicable Federal authority shall 
administer this title and is authorized to issue such regulations as 
may be required to carry out this title. Such regulations shall be 
subject to Congressional review under the provisions of chapter 8 of 
title 5, United States Code. The applicable Federal authority shall 
incorporate the process of `deemed file and use' with respect to the 
information filed under section 2901(a)(6)(A) and shall determine 
whether information filed by a HealthMart demonstrates compliance with 
the applicable requirements of this title. Such authority shall 
exercise its authority under this title in a manner that fosters and 
promotes the development of HealthMarts in order to improve access to 
health care coverage and services.
    ``(b) Periodic Reports.--The applicable Federal authority shall 
submit to Congress a report every 30 months, during the 10-year period 
beginning on the effective date of the rules promulgated by the 
applicable Federal authority to carry out this title, on the 
effectiveness of this title in promoting coverage of uninsured 
individuals. Such authority may provide for the production of such 
reports through one or more contracts with appropriate private 
entities.

``SEC. 2904. DEFINITIONS.

    ``For purposes of this title:
            ``(1) Applicable federal authority.--The term `applicable 
        Federal authority' means the Secretary of Health and Human 
        Services .
            ``(2) Eligible employee or individual.--The term `eligible' 
        means, with respect to an employee or other individual and a 
        HealthMart, an employee or individual who is eligible under 
        section 2901(c)(2) to enroll or be enrolled in health benefits 
        coverage offered through the HealthMart.
            ``(3) Employer; employee; dependent.--Except as the 
        applicable Federal authority may otherwise provide, the terms 
        `employer', `employee', and `dependent', as applied to health 
        insurance coverage offered by a health insurance issuer 
        licensed (or otherwise regulated) in a State, shall have the 
        meanings applied to such terms with respect to such coverage 
        under the laws of the State relating to such coverage and such 
        an issuer. The term `dependent' may include the spouse and 
        children of the individual involved.
            ``(4) Health benefits coverage.--The term `health benefits 
        coverage' has the meaning given the term group health insurance 
        coverage in section 2791(b)(4).
            ``(5) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791(b)(2).
            ``(6) Health status-related factor.--The term `health 
        status-related factor' has the meaning given such term in 
        section 2791(d)(9).
            ``(7) HealthMart.--The term `HealthMart' is defined in 
        section 2901(a).
            ``(8) Member.--The term `member`` means, with respect to a 
        HealthMart, an individual enrolled for health benefits coverage 
        through the HealthMart under section 2901(c)(2).
            ``(9) Purchaser.--The term `purchaser' means, with respect 
        to a HealthMart, an employer or individual that has contracted 
        under section 2901(c)(1)(A) with the HealthMart for the 
        purchase of health benefits coverage.''.

 TITLE II--HEALTH CARE ACCESS AND CHOICE THROUGH INDIVIDUAL MEMBERSHIP 
                          ASSOCIATIONS (IMAs)

SEC. 201. EXPANSION OF ACCESS AND CHOICE THROUGH INDIVIDUAL MEMBERSHIP 
              ASSOCIATIONS (IMAS).

    The Public Health Service Act, as amended by section 101, is 
further amended by adding at the end the following new title:

            ``TITLE XXX--INDIVIDUAL MEMBERSHIP ASSOCIATIONS

``SEC. 3001. DEFINITION OF INDIVIDUAL MEMBERSHIP ASSOCIATION (IMA).

    ``(a) In General.--For purposes of this title, the terms 
`individual membership association' and `IMA' mean a legal entity that 
meets the following requirements:
            ``(1) Organization.--The IMA is an organization operated 
        under the direction of an association (as defined in section 
        3004(1)).
            ``(2) Offering health benefits coverage.--
                    ``(A) Different groups.--The IMA, in conjunction 
                with those health insurance issuers that offer health 
                benefits coverage through the IMA, makes available 
                health benefits coverage in the manner described in 
                subsection (b) to all members of the IMA and the 
                dependents of such members in the manner described in 
                subsection (c)(2) at rates that are established by the 
                health insurance issuer on a policy or product specific 
                basis and that may vary only as permissible under State 
                law.
                    ``(B) Nondiscrimination in coverage offered.--
                            ``(i) In general.--Subject to clause (ii), 
                        the IMA may not offer health benefits coverage 
                        to a member of an IMA unless the same coverage 
                        is offered to all such members of the IMA.
                            ``(ii) Construction.--Nothing in this title 
                        shall be construed as requiring or permitting a 
                        health insurance issuer to provide coverage 
                        outside the service area of the issuer, as 
                        approved under State law, or requiring a health 
                        insurance issuer from excluding or limiting the 
                        coverage on any individual, subject to the 
                        requirement of section 2741.
                    ``(C) No financial underwriting.--The IMA provides 
                health benefits coverage only through contracts with 
                health insurance issuers and does not assume insurance 
                risk with respect to such coverage.
            ``(3) Geographic areas.--Nothing in this title shall be 
        construed as preventing the establishment and operation of more 
        than one IMA in a geographic area or as limiting the number of 
        IMAs that may operate in any area.
            ``(4) Provision of administrative services to purchasers.--
                    ``(A) In general.--The IMA may provide 
                administrative services for members. Such services may 
                include accounting, billing, and enrollment 
                information.
                    ``(B) Construction.--Nothing in this subsection 
                shall be construed as preventing an IMA from serving as 
                an administrative service organization to any entity.
            ``(5) Filing information.--The IMA files with the Secretary 
        information that demonstrates the IMA's compliance with the 
        applicable requirements of this title.
    ``(b) Health Benefits Coverage Requirements.--
            ``(1) Compliance with consumer protection requirements.--
        Any health benefits coverage offered through an IMA shall--
                    ``(A) be underwritten by a health insurance issuer 
                that--
                            ``(i) is licensed (or otherwise regulated) 
                        under State law,
                            ``(ii) meets all applicable State standards 
                        relating to consumer protection, subject to 
                        section 3002(b), and
                    ``(B) subject to paragraph (2), be approved or 
                otherwise permitted to be offered under State law.
            ``(2) Examples of types of coverage.--The benefits coverage 
        made available through an IMA may include, but is not limited 
        to, any of the following if it meets the other applicable 
        requirements of this title:
                    ``(A) Coverage through a health maintenance 
                organization.
                    ``(B) Coverage in connection with a preferred 
                provider organization.
                    ``(C) Coverage in connection with a licensed 
                provider-sponsored organization.
                    ``(D) Indemnity coverage through an insurance 
                company.
                    ``(E) Coverage offered in connection with a 
                contribution into a medical savings account or flexible 
                spending account.
                    ``(F) Coverage that includes a point-of-service 
                option.
                    ``(G) Any combination of such types of coverage.
            ``(3) Wellness bonuses for health promotion.--Nothing in 
        this title shall be construed as precluding a health insurance 
        issuer offering health benefits coverage through an IMA from 
        establishing premium discounts or rebates for members or from 
        modifying otherwise applicable copayments or deductibles in 
        return for adherence to programs of health promotion and 
        disease prevention so long as such programs are agreed to in 
advance by the IMA and comply with all other provisions of this title 
and do not discriminate among similarly situated members.
    ``(c) Members; Health Insurance Issuers.--
            ``(1) Members.--
                    ``(A) In general.--Under rules established to carry 
                out this title, with respect to an individual who is a 
                member of an IMA, the individual may enroll for health 
                benefits coverage (including coverage for dependents of 
                such individual) offered by a health insurance issuer 
                through the IMA.
                    ``(B) Rules for enrollment.--Nothing in this 
                paragraph shall preclude an IMA from establishing rules 
                of enrollment and reenrollment of members. Such rules 
                shall be applied consistently to all members within the 
                IMA and shall not be based in any manner on health 
                status-related factors.
            ``(2) Health insurance issuers.--The contract between an 
        IMA and a health insurance issuer shall provide, with respect 
        to a member enrolled with health benefits coverage offered by 
        the issuer through the IMA, for the payment of the premiums 
        collected by the issuer.

``SEC. 3002. APPLICATION OF CERTAIN LAWS AND REQUIREMENTS.

    ``State laws insofar as they relate to any of the following are 
superseded and shall not apply to health benefits coverage made 
available through an IMA:
            ``(1) Benefit requirements for health benefits coverage 
        offered through an IMA, including (but not limited to) 
        requirements relating to coverage of specific providers, 
        specific services or conditions, or the amount, duration, or 
        scope of benefits, but not including requirements to the extent 
        required to implement title XXVII or other Federal law and to 
        the extent the requirement prohibits an exclusion of a specific 
        disease from such coverage.
            ``(2) Any other requirements (including limitations on 
        compensation arrangements) that, directly or indirectly, 
        preclude (or have the effect of precluding) the offering of 
        such coverage through an IMA, if the IMA meets the requirements 
        of this title.
Any State law or regulation relating to the composition or organization 
of an IMA is preempted to the extent the law or regulation is 
inconsistent with the provisions of this title.

``SEC. 3003. ADMINISTRATION.

    ``(a) In General.--The Secretary shall administer this title and is 
authorized to issue such regulations as may be required to carry out 
this title. Such regulations shall be subject to Congressional review 
under the provisions of chapter 8 of title 5, United States Code. The 
Secretary shall incorporate the process of `deemed file and use' with 
respect to the information filed under section 3001(a)(5)(A) and shall 
determine whether information filed by an IMA demonstrates compliance 
with the applicable requirements of this title. The Secretary shall 
exercise authority under this title in a manner that fosters and 
promotes the development of IMAs in order to improve access to health 
care coverage and services.
    ``(b) Periodic Reports.--The Secretary shall submit to Congress a 
report every 30 months, during the 10-year period beginning on the 
effective date of the rules promulgated by the Secretary to carry out 
this title, on the effectiveness of this title in promoting coverage of 
uninsured individuals. The Secretary may provide for the production of 
such reports through one or more contracts with appropriate private 
entities.

``SEC. 3004. DEFINITIONS.

    ``For purposes of this title:
            ``(1) Association.--The term `association' means, with 
        respect to health insurance coverage offered in a State, an 
        association which--
                    ``(A) has been actively in existence for at least 5 
                years;
                    ``(B) has been formed and maintained in good faith 
                for purposes other than obtaining insurance;
                    ``(C) does not condition membership in the 
                association on any health status-related factor 
                relating to an individual (including an employee of an 
                employer or a dependent of an employee); and
                    ``(D) does not make health insurance coverage 
                offered through the association available other than in 
                connection with a member of the association.
            ``(2) Dependent.--The term `dependent', as applied to 
        health insurance coverage offered by a health insurance issuer 
        licensed (or otherwise regulated) in a State, shall have the 
        meaning applied to such term with respect to such coverage 
        under the laws of the State relating to such coverage and such 
        an issuer. Such term may include the spouse and children of the 
        individual involved.
            ``(3) Health benefits coverage.--The term `health benefits 
        coverage' has the meaning given the term health insurance 
        coverage in section 2791(b)(1).
            ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791(b)(2).
            ``(5) Health status-related factor.--The term `health 
        status-related factor' has the meaning given such term in 
        section 2791(d)(9).
            ``(6) IMA; individual membership association.--The terms 
        `IMA' and `individual membership association' are defined in 
        section 3001(a).
            ``(7) Member.--The term `member' means, with respect to an 
        IMA, an individual who is a member of the association to which 
        the IMA is offering coverage.''.

  TITLE III--FEDERAL MATCHING FUNDING FOR STATE INSURANCE EXPENDITURES

SEC. 301. FEDERAL MATCHING FUNDING FOR STATE INSURANCE EXPENDITURES.

    (a) In General.--Subject to the succeeding provisions of this 
section, each State shall receive from the Secretary of Health and 
Human Services an amount equal to 50 percent of the funds expended by 
the State in providing for the use, in connection with providing health 
benefits coverage, of a high-risk pool, a reinsurance pool, or other 
risk-adjustment mechanism used for the purpose of subsidizing the 
purchase of private health insurance.
    (b) Funding Limitation.--A State shall not receive under this 
section for a fiscal year more than a total of 50 cents multiplied by 
the average number of residents (as estimated by the Secretary) in the 
State in the fiscal year.
    (c) Administration.--The Secretary of Health and Human Services 
shall provide for the administration of this section and may establish 
such terms and conditions, including the requirement of an application, 
as may be appropriate to carry out this section.
    (d) Construction.--Nothing in this section shall be construed as 
requiring a State to operate a reinsurance pool (or other risk-
adjustment mechanism) under this section or as preventing a State from 
operating such a pool or mechanism through one or more private 
entities.
    (e) High-Risk Pool.--For purposes of this section, the term ``high-
risk pool'' means any qualified high risk pool (as defined in section 
2744(c)(2) of the Public Health Service Act).
    (f) Reinsurance Pool or Other Risk-Adjustment Mechanism Defined.--
For purposes of this section, the term ``reinsurance pool or other 
risk-adjustment mechanism'' means any State-based risk spreading 
mechanism to subsidize the purchase of private health insurance for the 
high-risk population.
    (g) High-Risk Population.--For purposes of this section, the term 
``high-risk population'' means--
            (1) individuals who, by reason of the existence or history 
        of a medical condition, are able to acquire health coverage 
        only at rates which are at least 150 percent of the standard 
        risk rates for such coverage, and
            (2) individuals who are provided health coverage by a high-
        risk pool.
    (h) State Defined.--For purposes of this section, the term 
``State'' includes the District of Columbia, Puerto Rico, the Virgin 
Islands, Guam, American Samoa, and the Northern Mariana Islands.

 TITLE IV--AFFORDABLE HEALTH COVERAGE FOR EMPLOYEES OF SMALL BUSINESSES

SEC. 401. SHORT TITLE OF TITLE.

    This title may be cited as the ``Small Business Access and Choice 
for Entrepreneurs Act of 2003''.

SEC. 402. RULES.

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

           ``Part 8--Rules Governing Association Health Plans

``SEC. 801. ASSOCIATION HEALTH PLANS.

    ``(a) In General.--For purposes of this part, the term `association 
health plan' means a group health plan--
            ``(1) whose sponsor is (or is deemed under this part to be) 
        described in subsection (b); and
            ``(2) under which at least one option of health insurance 
        coverage offered by a health insurance issuer (which may 
        include, among other options, managed care options, point of 
        service options, and preferred provider options) is provided to 
        participants and beneficiaries, unless, for any plan year, such 
        coverage remains unavailable to the plan despite good faith 
        efforts exercised by the plan to secure such coverage.
    ``(b) Sponsorship.--The sponsor of a group health plan is described 
in this subsection if such sponsor--
            ``(1) is organized and maintained in good faith, with a 
        constitution and bylaws specifically stating its purpose and 
        providing for periodic meetings on at least an annual basis, as 
        a bona fide trade association, a bona fide industry association 
        (including a rural electric cooperative association or a rural 
        telephone cooperative association), a bona fide professional 
        association, or a bona fide chamber of commerce (or similar 
        bona fide business association, including a corporation or 
        similar organization that operates on a cooperative basis 
        (within the meaning of section 1381 of the Internal Revenue 
        Code of 1986)), for substantial purposes other than that of 
        obtaining or providing medical care;
            ``(2) is established as a permanent entity which receives 
        the active support of its members and collects from its members 
        on a periodic basis dues or payments necessary to maintain 
        eligibility for membership in the sponsor; and
            ``(3) does not condition membership, such dues or payments, 
        or coverage under the plan on the basis of health status-
        related factors with respect to the employees of its members 
        (or affiliated members), or the dependents of such employees, 
        and does not condition such dues or payments on the basis of 
        group health plan participation.
Any sponsor consisting of an association of entities which meet the 
requirements of paragraphs (1), (2), and (3) shall be deemed to be a 
sponsor described in this subsection.

``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.

    ``(a) In General.--The applicable authority shall prescribe by 
regulation, through negotiated rulemaking, a procedure under which, 
subject to subsection (b), the applicable authority shall certify 
association health plans which apply for certification as meeting the 
requirements of this part.
    ``(b) Standards.--Under the procedure prescribed pursuant to 
subsection (a), in the case of an association health plan that provides 
at least one benefit option which does not consist of health insurance 
coverage, the applicable authority shall certify such plan as meeting 
the requirements of this part only if the applicable authority is 
satisfied that--
            ``(1) such certification--
                    ``(A) is administratively feasible;
                    ``(B) is not adverse to the interests of the 
                individuals covered under the plan; and
                    ``(C) is protective of the rights and benefits of 
                the individuals covered under the plan; and
            ``(2) the applicable requirements of this part are met (or, 
        upon the date on which the plan is to commence operations, will 
        be met) with respect to the plan.
    ``(c) Requirements Applicable to Certified Plans.--An association 
health plan with respect to which certification under this part is in 
effect shall meet the applicable requirements of this part, effective 
on the date of certification (or, if later, on the date on which the 
plan is to commence operations).
    ``(d) Requirements for Continued Certification.--The applicable 
authority may provide by regulation, through negotiated rulemaking, for 
continued certification of association health plans under this part.
    ``(e) Class Certification for Fully Insured Plans.--The applicable 
authority shall establish a class certification procedure for 
association health plans under which all benefits consist of health 
insurance coverage. Under such procedure, the applicable authority 
shall provide for the granting of certification under this part to the 
plans in each class of such association health plans upon appropriate 
filing under such procedure in connection with plans in such class and 
payment of the prescribed fee under section 807(a).
    ``(f) Certification of Self-Insured Association Health Plans.--An 
association health plan which offers one or more benefit options which 
do not consist of health insurance coverage may be certified under this 
part only if such plan consists of any of the following:
            ``(1) a plan which offered such coverage on the date of the 
        enactment of the Small Business Access and Choice for 
        Entrepreneurs Act of 2003,
            ``(2) a plan under which the sponsor does not restrict 
        membership to one or more trades and businesses or industries 
        and whose eligible participating employers represent a broad 
        cross-section of trades and businesses or industries, or
            ``(3) a plan whose eligible participating employers 
        represent one or more trades or businesses, or one or more 
        industries, which have been indicated as having average or 
        above-average health insurance risk or health claims experience 
        by reason of State rate filings, denials of coverage, proposed 
        premium rate levels, and other means demonstrated by such plan 
        in accordance with regulations which the Secretary shall 
        prescribe through negotiated rulemaking, including (but not 
        limited to) the following: agriculture; automobile dealerships; 
        barbering and cosmetology; child care; construction; dance, 
        theatrical, and orchestra productions; disinfecting and pest 
        control; eating and drinking establishments; fishing; 
        hospitals; labor organizations; logging; manufacturing 
        (metals); mining; medical and dental practices; medical 
        laboratories; sanitary services; transportation (local and 
        freight); and warehousing.

``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES.

    ``(a) Sponsor.--The requirements of this subsection are met with 
respect to an association health plan if the sponsor has met (or is 
deemed under this part to have met) the requirements of section 801(b) 
for a continuous period of not less than 3 years ending with the date 
of the application for certification under this part.
    ``(b) Board of Trustees.--The requirements of this subsection are 
met with respect to an association health plan if the following 
requirements are met:
            ``(1) Fiscal control.--The plan is operated, pursuant to a 
        trust agreement, by a board of trustees which has complete 
        fiscal control over the plan and which is responsible for all 
        operations of the plan.
            ``(2) Rules of operation and financial controls.--The board 
        of trustees has in effect rules of operation and financial 
        controls, based on a 3-year plan of operation, adequate to 
        carry out the terms of the plan and to meet all requirements of 
        this title applicable to the plan.
            ``(3) Rules governing relationship to participating 
        employers and to contractors.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), the members of the board of 
                trustees are individuals selected from individuals who 
                are the owners, officers, directors, or employees of 
                the participating employers or who are partners in the 
                participating employers and actively participate in the 
                business.
                    ``(B) Limitation.--
                            ``(i) General rule.--Except as provided in 
                        clauses (ii) and (iii), no such member is an 
                        owner, officer, director, or employee of, or 
partner in, a contract administrator or other service provider to the 
plan.
                            ``(ii) Limited exception for providers of 
                        services solely on behalf of the sponsor.--
                        Officers or employees of a sponsor which is a 
                        service provider (other than a contract 
                        administrator) to the plan may be members of 
                        the board if they constitute not more than 25 
                        percent of the membership of the board and they 
                        do not provide services to the plan other than 
                        on behalf of the sponsor.
                            ``(iii) Treatment of providers of medical 
                        care.--In the case of a sponsor which is an 
                        association whose membership consists primarily 
                        of providers of medical care, clause (i) shall 
                        not apply in the case of any service provider 
                        described in subparagraph (A) who is a provider 
                        of medical care under the plan.
                    ``(C) Certain plans excluded.--Subparagraph (A) 
                shall not apply to an association health plan which is 
                in existence on the date of the enactment of the Small 
                Business Access and Choice for Entrepreneurs Act of 
                2003.
                    ``(D) Sole authority.--The board has sole authority 
                under the plan to approve applications for 
                participation in the plan and to contract with a 
                service provider to administer the day-to-day affairs 
                of the plan.
    ``(c) Treatment of Franchise Networks.--In the case of a group 
health plan which is established and maintained by a franchiser for a 
franchise network consisting of its franchisees--
            ``(1) the requirements of subsection (a) and section 
        801(a)(1) shall be deemed met if such requirements would 
        otherwise be met if the franchiser were deemed to be the 
        sponsor referred to in section 801(b), such network were deemed 
        to be an association described in section 801(b), and each 
        franchisee were deemed to be a member (of the association and 
        the sponsor) referred to in section 801(b); and
            ``(2) the requirements of section 804(a)(1) shall be deemed 
        met.
The Secretary may by regulation, through negotiated rulemaking, define 
for purposes of this subsection the terms `franchiser', `franchise 
network', and `franchisee'.
    ``(d) Certain Collectively Bargained Plans.--
            ``(1) In general.--In the case of a group health plan 
        described in paragraph (2)--
                    ``(A) the requirements of subsection (a) and 
                section 801(a)(1) shall be deemed met;
                    ``(B) the joint board of trustees shall be deemed a 
                board of trustees with respect to which the 
                requirements of subsection (b) are met; and
                    ``(C) the requirements of section 804 shall be 
                deemed met.
            ``(2) Requirements.--A group health plan is described in 
        this paragraph if--
                    ``(A) the plan is a multiemployer plan; or
                    ``(B) the plan is in existence on April 1, 1997, 
                and would be described in section 3(40)(A)(i) but 
                solely for the failure to meet the requirements of 
                section 3(40)(C)(ii).

``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

    ``(a) Covered Employers and Individuals.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan--
            ``(1) each participating employer must be--
                    ``(A) a member of the sponsor;
                    ``(B) the sponsor; or
                    ``(C) an affiliated member of the sponsor with 
                respect to which the requirements of subsection (b) are 
                met;
        except that, in the case of a sponsor which is a professional 
        association or other individual-based association, if at least 
        one of the officers, directors, or employees of an employer, or 
        at least one of the individuals who are partners in an employer 
        and who actively participates in the business, is a member or 
        such an affiliated member of the sponsor, participating 
        employers may also include such employer; and
            ``(2) all individuals commencing coverage under the plan 
        after certification under this part must be--
                    ``(A) active or retired owners (including self-
                employed individuals), officers, directors, or 
                employees of, or partners in, participating employers; 
                or
                    ``(B) the beneficiaries of individuals described in 
                subparagraph (A).
    ``(b) Coverage of Previously Uninsured Employees.--In the case of 
an association health plan in existence on the date of the enactment of 
the Small Business Access and Choice for Entrepreneurs Act of 2003, an 
affiliated member of the sponsor of the plan may be offered coverage 
under the plan as a participating employer only if--
            ``(1) the affiliated member was an affiliated member on the 
        date of certification under this part; or
            ``(2) during the 12-month period preceding the date of the 
        offering of such coverage, the affiliated member has not 
        maintained or contributed to a group health plan with respect 
        to any of its employees who would otherwise be eligible to 
        participate in such association health plan.
    ``(c) Individual Market Unaffected.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan, no participating employer may provide health 
insurance coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer under the plan, 
if such exclusion of the employee from coverage under the plan is based 
on a health status-related factor with respect to the employee and such 
employee would, but for such exclusion on such basis, be eligible for 
coverage under the plan.
    ``(d) Prohibition of Discrimination Against Employers and Employees 
Eligible To Participate.--The requirements of this subsection are met 
with respect to an association health plan if--
            ``(1) under the terms of the plan, all employers meeting 
        the preceding requirements of this section are eligible to 
        qualify as participating employers for all geographically 
        available coverage options, unless, in the case of any such 
        employer, participation or contribution requirements of the 
        type referred to in section 2711 of the Public Health Service 
        Act are not met;
            ``(2) upon request, any employer eligible to participate is 
        furnished information regarding all coverage options available 
        under the plan; and
            ``(3) the applicable requirements of sections 701, 702, and 
        703 are met with respect to the plan.

``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION 
              RATES, AND BENEFIT OPTIONS.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if the following requirements are 
met:
            ``(1) Contents of governing instruments.--The instruments 
        governing the plan include a written instrument, meeting the 
        requirements of an instrument required under section 402(a)(1), 
        which--
                    ``(A) provides that the board of trustees serves as 
                the named fiduciary required for plans under section 
                402(a)(1) and serves in the capacity of a plan 
                administrator (referred to in section 3(16)(A));
                    ``(B) provides that the sponsor of the plan is to 
                serve as plan sponsor (referred to in section 
                3(16)(B)); and
                    ``(C) incorporates the requirements of section 806.
            ``(2) Contribution rates must be nondiscriminatory.--
                    ``(A) The contribution rates for any participating 
                small employer do not vary on the basis of the claims 
                experience of such employer and do not vary on the 
                basis of the type of business or industry in which such 
                employer is engaged.
                    ``(B) Nothing in this title or any other provision 
                of law shall be construed to preclude an association 
                health plan, or a health insurance issuer offering 
                health insurance coverage in connection with an 
                association health plan, from--
                            ``(i) setting contribution rates based on 
                        the claims experience of the plan; or
                            ``(ii) varying contribution rates for small 
                        employers in a State to the extent that such 
                        rates could vary using the same methodology 
                        employed in such State for regulating premium 
                        rates in the small group market with respect to 
                        health insurance coverage offered in connection 
                        with bona fide associations (within the meaning 
                        of section 2791(d)(3) of the Public Health 
                        Service Act),
                subject to the requirements of section 702(b) relating 
                to contribution rates.
            ``(3) Floor for number of covered individuals with respect 
        to certain plans.--If any benefit option under the plan does 
        not consist of health insurance coverage, the plan has as of 
        the beginning of the plan year not fewer than 1,000 
        participants and beneficiaries.
            ``(4) Marketing requirements.--
                    ``(A) In general.--If a benefit option which 
                consists of health insurance coverage is offered under 
                the plan, State-licensed insurance agents shall be used 
                to distribute to small employers coverage which does 
                not consist of health insurance coverage in a manner 
                comparable to the manner in which such agents are used 
                to distribute health insurance coverage.
                    ``(B) State-licensed insurance agents.--For 
                purposes of subparagraph (A), the term `State-licensed 
                insurance agents' means one or more agents who are 
                licensed in a State and are subject to the laws of such 
                State relating to licensure, qualification, testing, 
                examination, and continuing education of persons 
                authorized to offer, sell, or solicit health insurance 
                coverage in such State.
            ``(5) Regulatory requirements.--Such other requirements as 
        the applicable authority determines are necessary to carry out 
        the purposes of this part, which shall be prescribed by the 
        applicable authority by regulation through negotiated 
        rulemaking.
    ``(b) Health Benefit Options Under an Association Health Plan.--
            ``(1) Examples of types of coverage.--The health benefits 
        coverage made available through an association health plan may 
        include, but is not limited to, any of the following if it 
        meets the other applicable requirements of this title:
                    ``(A) Coverage through a health maintenance 
                organization.
                    ``(B) Coverage in connection with a preferred 
                provider organization.
                    ``(C) Coverage in connection with a licensed 
                provider-sponsored organization.
                    ``(D) Indemnity coverage through an insurance 
                company.
                    ``(E) Coverage offered in connection with a 
                contribution into a medical savings account or flexible 
                spending account.
                    ``(F) Coverage that includes a point-of-service 
                option.
                    ``(G) Any combination of such types of coverage.
            ``(2) Health insurance coverage options.--
                    ``(A) In general.--An association health plan shall 
                include a minimum of 4 health insurance coverage 
                options. At least 1 option shall be a non network 
                option. At least 2 options shall meet all applicable 
                State benefit mandates.
                    ``(B) Model benefits package.--The Secretary in 
                consultation with the National Association of Insurance 
                Commissioners shall develop a model benefits package 
                for health insurance coverage not later than one year 
                after the date of the enactment of the Consensus Health 
                Care Access and Choice Act of 2003.
                    ``(C) Exception to general rule.--An association 
                health plan may offer 2 options that meet the 
                requirements of the model benefits package in lieu of 
                the State benefit mandate offerings required under 
                subparagraph (A).
            ``(3) Permitting association health plans to adjust 
        distributions among issuers to reflect relative risk of 
        enrollees.--Nothing in this section shall be construed as 
        precluding an association health plan from providing for 
        adjustments in amounts distributed among the health insurance 
        issuers offering health benefits coverage through the 
        association health plan based on factors such as the relative 
        health care risk of members enrolled under the coverage offered 
        by the different issuers.
            ``(4) Construction.--Except as provided in subparagraph 
        (2), nothing in this part or any provision of State law (as 
        defined in section 514(c)(1)) shall be construed to preclude an 
        association health plan, or a health insurance issuer offering 
        health insurance coverage in connection with an association 
        health plan, from exercising its sole discretion in selecting 
        the specific items and services consisting of medical care to 
        be included as benefits under such plan or coverage, except 
        (subject to section 514) in the case of any law to the extent 
        that it (1) prohibits an exclusion of a specific disease from 
        such coverage, or (2) is not preempted under section 731(a)(1) 
        with respect to matters governed by section 711 or 712.

``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR 
              PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH 
              INSURANCE COVERAGE.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if--
            ``(1) the benefits under the plan consist solely of health 
        insurance coverage; or
            ``(2) if the plan provides any additional benefit options 
        which do not consist of health insurance coverage, the plan--
                    ``(A) establishes and maintains reserves with 
                respect to such additional benefit options, in amounts 
                recommended by the qualified actuary, consisting of--
                            ``(i) a reserve sufficient for unearned 
                        contributions;
                            ``(ii) a reserve sufficient for benefit 
                        liabilities which have been incurred, which 
                        have not been satisfied, and for which risk of 
                        loss has not yet been transferred, and for 
                        expected administrative costs with respect to 
                        such benefit liabilities;
                            ``(iii) a reserve sufficient for any other 
                        obligations of the plan; and
                            ``(iv) a reserve sufficient for a margin of 
                        error and other fluctuations, taking into 
                        account the specific circumstances of the plan; 
                        and
                    ``(B) establishes and maintains aggregate and 
                specific excess/stop loss insurance and solvency 
                indemnification, with respect to such additional 
                benefit options for which risk of loss has not yet been 
                transferred, as follows:
                            ``(i) The plan shall secure aggregate 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is not greater than 125 
                        percent of expected gross annual claims. The 
                        applicable authority may by regulation, through 
                        negotiated rulemaking, provide for upward 
                        adjustments in the amount of such percentage in 
                        specified circumstances in which the plan 
                        specifically provides for and maintains 
                        reserves in excess of the amounts required 
                        under subparagraph (A).
                            ``(ii) The plan shall secure specific 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is at least equal to an 
                        amount recommended by the plan's qualified 
                        actuary (but not more than $175,000). The 
                        applicable authority may by regulation, through 
                        negotiated rulemaking, provide for adjustments 
                        in the amount of such insurance in specified 
                        circumstances in which the plan specifically 
                        provides for and maintains reserves in excess 
                        of the amounts required under subparagraph (A).
                            ``(iii) The plan shall secure 
                        indemnification insurance for any claims which 
                        the plan is unable to satisfy by reason of a 
                        plan termination.
Any regulations prescribed by the applicable authority pursuant to 
clause (i) or (ii) of subparagraph (B) may allow for such adjustments 
in the required levels of excess/stop loss insurance as the qualified 
actuary may recommend, taking into account the specific circumstances 
of the plan.
    ``(b) Minimum Surplus in Addition to Claims Reserves.--In the case 
of any association health plan described in subsection (a)(2), the 
requirements of this subsection are met if the plan establishes and 
maintains surplus in an amount at least equal to--
            ``(1) $500,000, or
            ``(2) such greater amount (but not greater than $2,000,000) 
        as may be set forth in regulations prescribed by the applicable 
        authority through negotiated rulemaking, based on the level of 
        aggregate and specific excess/stop loss insurance provided with 
        respect to such plan.
    ``(c) Additional Requirements.--In the case of any association 
health plan described in subsection (a)(2), the applicable authority 
may provide such additional requirements relating to reserves and 
excess/stop loss insurance as the applicable authority considers 
appropriate. Such requirements may be provided by regulation, through 
negotiated rulemaking, with respect to any such plan or any class of 
such plans.
    ``(d) Adjustments for Excess/Stop Loss Insurance.--The applicable 
authority may provide for adjustments to the levels of reserves 
otherwise required under subsections (a) and (b) with respect to any 
plan or class of plans to take into account excess/stop loss insurance 
provided with respect to such plan or plans.
    ``(e) Alternative Means of Compliance.--The applicable authority 
may permit an association health plan described in subsection (a)(2) to 
substitute, for all or part of the requirements of this section (except 
subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless 
arrangement, or other financial arrangement as the applicable authority 
determines to be adequate to enable the plan to fully meet all its 
financial obligations on a timely basis and is otherwise no less 
protective of the interests of participants and beneficiaries than the 
requirements for which it is substituted. The applicable authority may 
take into account, for purposes of this subsection, evidence provided 
by the plan or sponsor which demonstrates an assumption of liability 
with respect to the plan. Such evidence may be in the form of a 
contract of indemnification, lien, bonding, insurance, letter of 
credit, recourse under applicable terms of the plan in the form of 
assessments of participating employers, security, or other financial 
arrangement.
    ``(f) Measures To Ensure Continued Payment of Benefits by Certain 
Plans in Distress.--
            ``(1) Payments by certain plans to association health plan 
        fund.--
                    ``(A) In general.--In the case of an association 
                health plan described in subsection (a)(2), the 
                requirements of this subsection are met if the plan 
                makes payments into the Association Health Plan Fund 
                under this subparagraph when they are due. Such 
                payments shall consist of annual payments in the amount 
                of $5,000, and, in addition to such annual payments, 
                such supplemental payments as the Secretary may 
                determine to be necessary under paragraph (2). Payments 
                under this paragraph are payable to the Fund at the 
                time determined by the Secretary. Initial payments are 
                due in advance of certification under this part. 
                Payments shall continue to accrue until a plan's assets 
                are distributed pursuant to a termination procedure.
                    ``(B) Penalties for failure to make payments.--If 
                any payment is not made by a plan when it is due, a 
                late payment charge of not more than 100 percent of the 
                payment which was not timely paid shall be payable by 
                the plan to the Fund.
                    ``(C) Continued duty of the secretary.--The 
                Secretary shall not cease to carry out the provisions 
                of paragraph (2) on account of the failure of a plan to 
                pay any payment when due.
            ``(2) Payments by secretary to continue excess/stop loss 
        insurance coverage and indemnification insurance coverage for 
        certain plans.--In any case in which the applicable authority 
        determines that there is, or that there is reason to believe 
        that there will be: (A) a failure to take necessary corrective 
        actions under section 809(a) with respect to an association 
        health plan described in subsection (a)(2); or (B) a 
        termination of such a plan under section 809(b) or 810(b)(8) 
        (and, if the applicable authority is not the Secretary, 
        certifies such determination to the Secretary), the Secretary 
        shall determine the amounts necessary to make payments to an 
        insurer (designated by the Secretary) to maintain in force 
        excess/stop loss insurance coverage or indemnification 
        insurance coverage for such plan, if the Secretary determines 
        that there is a reasonable expectation that, without such 
        payments, claims would not be satisfied by reason of 
        termination of such coverage. The Secretary shall, to the 
        extent provided in advance in appropriation Acts, pay such 
        amounts so determined to the insurer designated by the 
        Secretary.
            ``(3) Association health plan fund.--
                    ``(A) In general.--There is established on the 
                books of the Treasury a fund to be known as the 
                `Association Health Plan Fund'. The Fund shall be 
                available for making payments pursuant to paragraph 
                (2). The Fund shall be credited with payments received 
                pursuant to paragraph (1)(A), penalties received 
                pursuant to paragraph (1)(B); and earnings on 
                investments of amounts of the Fund under subparagraph 
                (B).
                    ``(B) Investment.--Whenever the Secretary 
                determines that the moneys of the fund are in excess of 
                current needs, the Secretary may request the investment 
                of such amounts as the Secretary determines advisable 
                by the Secretary of the Treasury in obligations issued 
                or guaranteed by the United States.
    ``(g) Excess/Stop Loss Insurance.--For purposes of this section--
            ``(1) Aggregate excess/stop loss insurance.--The term 
        `aggregate excess/stop loss insurance' means, in connection 
        with an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation through negotiated rulemaking) provides for 
                payment to the plan with respect to aggregate claims 
                under the plan in excess of an amount or amounts 
                specified in such contract;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
            ``(2) Specific excess/stop loss insurance.--The term 
        `specific excess/stop loss insurance' means, in connection with 
        an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation through negotiated rulemaking) provides for 
                payment to the plan with respect to claims under the 
                plan in connection with a covered individual in excess 
                of an amount or amounts specified in such contract in 
                connection with such covered individual;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
    ``(h) Indemnification Insurance.--For purposes of this section, the 
term `indemnification insurance' means, in connection with an 
association health plan, a contract--
            ``(1) under which an insurer (meeting such minimum 
        standards as the applicable authority may prescribe through 
        negotiated rulemaking) provides for payment to the plan with 
        respect to claims under the plan which the plan is unable to 
        satisfy by reason of a termination pursuant to section 809(b) 
        (relating to mandatory termination);
            ``(2) which is guaranteed renewable and noncancellable for 
        any reason (except as the applicable authority may prescribe by 
        regulation through negotiated rulemaking); and
            ``(3) which allows for payment of premiums by any third 
        party on behalf of the insured plan.
    ``(i) Reserves.--For purposes of this section, the term `reserves' 
means, in connection with an association health plan, plan assets which 
meet the fiduciary standards under part 4 and such additional 
requirements regarding liquidity as the applicable authority may 
prescribe through negotiated rulemaking.
    ``(j) Solvency Standards Working Group.--
            ``(1) In general.--Within 90 days after the date of the 
        enactment of the Small Business Access and Choice for 
        Entrepreneurs Act of 2003, the applicable authority shall 
        establish a Solvency Standards Working Group. In prescribing 
        the initial regulations under this section, the applicable 
        authority shall take into account the recommendations of such 
        Working Group.
            ``(2) Membership.--The Working Group shall consist of not 
        more than 15 members appointed by the applicable authority. The 
        applicable authority shall include among persons invited to 
        membership on the Working Group at least one of each of the 
        following:
                    ``(A) a representative of the National Association 
                of Insurance Commissioners;
                    ``(B) a representative of the American Academy of 
                Actuaries;
                    ``(C) a representative of the State governments, or 
                their interests;
                    ``(D) a representative of existing self-insured 
                arrangements, or their interests;
                    ``(E) a representative of associations of the type 
                referred to in section 801(b)(1), or their interests; 
                and
                    ``(F) a representative of multiemployer plans that 
                are group health plans, or their interests.

``SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED REQUIREMENTS.

    ``(a) Filing Fee.--Under the procedure prescribed pursuant to 
section 802(a), an association health plan shall pay to the applicable 
authority at the time of filing an application for certification under 
this part a filing fee in the amount of $5,000, which shall be 
available in the case of the Secretary, to the extent provided in 
appropriation Acts, for the sole purpose of administering the 
certification procedures applicable with respect to association health 
plans.
    ``(b) Information To Be Included in Application for 
Certification.--An application for certification under this part meets 
the requirements of this section only if it includes, in a manner and 
form which shall be prescribed by the applicable authority through 
negotiated rulemaking, at least the following information:
            ``(1) Identifying information.--The names and addresses 
        of--
                    ``(A) the sponsor; and
                    ``(B) the members of the board of trustees of the 
                plan.
            ``(2) States in which plan intends to do business.--The 
        States in which participants and beneficiaries under the plan 
        are to be located and the number of them expected to be located 
        in each such State.
            ``(3) Bonding requirements.--Evidence provided by the board 
        of trustees that the bonding requirements of section 412 will 
        be met as of the date of the application or (if later) 
        commencement of operations.
            ``(4) Plan documents.--A copy of the documents governing 
        the plan (including any bylaws and trust agreements), the 
        summary plan description, and other material describing the 
        benefits that will be provided to participants and 
        beneficiaries under the plan.
            ``(5) Agreements with service providers.--A copy of any 
        agreements between the plan and contract administrators and 
        other service providers.
            ``(6) Funding report.--In the case of association health 
        plans providing benefits options in addition to health 
        insurance coverage, a report setting forth information with 
        respect to such additional benefit options determined as of a 
        date within the 120-day period ending with the date of the 
        application, including the following:
                    ``(A) Reserves.--A statement, certified by the 
                board of trustees of the plan, and a statement of 
                actuarial opinion, signed by a qualified actuary, that 
                all applicable requirements of section 806 are or will 
                be met in accordance with regulations which the 
                applicable authority shall prescribe through negotiated 
                rulemaking.
                    ``(B) Adequacy of contribution rates.--A statement 
                of actuarial opinion, signed by a qualified actuary, 
                which sets forth a description of the extent to which 
                contribution rates are adequate to provide for the 
                payment of all obligations and the maintenance of 
                required reserves under the plan for the 12-month 
                period beginning with such date within such 120-day 
                period, taking into account the expected coverage and 
                experience of the plan. If the contribution rates are 
                not fully adequate, the statement of actuarial opinion 
                shall indicate the extent to which the rates are 
                inadequate and the changes needed to ensure adequacy.
                    ``(C) Current and projected value of assets and 
                liabilities.--A statement of actuarial opinion signed 
                by a qualified actuary, which sets forth the current 
                value of the assets and liabilities accumulated under 
                the plan and a projection of the assets, liabilities, 
                income, and expenses of the plan for the 12-month 
                period referred to in subparagraph (B). The income 
                statement shall identify separately the plan's 
                administrative expenses and claims.
                    ``(D) Costs of coverage to be charged and other 
                expenses.--A statement of the costs of coverage to be 
                charged, including an itemization of amounts for 
                administration, reserves, and other expenses associated 
                with the operation of the plan.
                    ``(E) Other information.--Any other information as 
                may be determined by the applicable authority, by 
                regulation through negotiated rulemaking, as necessary 
                to carry out the purposes of this part.
    ``(c) Filing Notice of Certification With States.--A certification 
granted under this part to an association health plan shall not be 
effective unless written notice of such certification is filed with the 
applicable State authority of each State in which at least 25 percent 
of the participants and beneficiaries under the plan are located. For 
purposes of this subsection, an individual shall be considered to be 
located in the State in which a known address of such individual is 
located or in which such individual is employed.
    ``(d) Notice of Material Changes.--In the case of any association 
health plan certified under this part, descriptions of material changes 
in any information which was required to be submitted with the 
application for the certification under this part shall be filed in 
such form and manner as shall be prescribed by the applicable authority 
by regulation through negotiated rulemaking. The applicable authority 
may require by regulation, through negotiated rulemaking, prior notice 
of material changes with respect to specified matters which might serve 
as the basis for suspension or revocation of the certification.
    ``(e) Reporting Requirements for Certain Association Health 
Plans.--An association health plan certified under this part which 
provides benefit options in addition to health insurance coverage for 
such plan year shall meet the requirements of section 103 by filing an 
annual report under such section which shall include information 
described in subsection (b)(6) with respect to the plan year and, 
notwithstanding section 104(a)(1)(A), shall be filed with the 
applicable authority not later than 90 days after the close of the plan 
year (or on such later date as may be prescribed by the applicable 
authority). The applicable authority may require by regulation through 
negotiated rulemaking such interim reports as it considers appropriate.
    ``(f) Engagement of Qualified Actuary.--The board of trustees of 
each association health plan which provides benefits options in 
addition to health insurance coverage and which is applying for 
certification under this part or is certified under this part shall 
engage, on behalf of all participants and beneficiaries, a qualified 
actuary who shall be responsible for the preparation of the materials 
comprising information necessary to be submitted by a qualified actuary 
under this part. The qualified actuary shall utilize such assumptions 
and techniques as are necessary to enable such actuary to form an 
opinion as to whether the contents of the matters reported under this 
part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the plan and to reasonable expectations; and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the plan.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.

``SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

    ``Except as provided in section 809(b), an association health plan 
which is or has been certified under this part may terminate (upon or 
at any time after cessation of accruals in benefit liabilities) only if 
the board of trustees--
            ``(1) not less than 60 days before the proposed termination 
        date, provides to the participants and beneficiaries a written 
        notice of intent to terminate stating that such termination is 
        intended and the proposed termination date;
            ``(2) develops a plan for winding up the affairs of the 
        plan in connection with such termination in a manner which will 
        result in timely payment of all benefits for which the plan is 
        obligated; and
            ``(3) submits such plan in writing to the applicable 
        authority.
Actions required under this section shall be taken in such form and 
manner as may be prescribed by the applicable authority by regulation 
through negotiated rulemaking.

``SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

    ``(a) Actions To Avoid Depletion of Reserves.--An association 
health plan which is certified under this part and which provides 
benefits other than health insurance coverage shall continue to meet 
the requirements of section 806, irrespective of whether such 
certification continues in effect. The board of trustees of such plan 
shall determine quarterly whether the requirements of section 806 are 
met. In any case in which the board determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the applicable authority makes such a determination and so notifies 
the board, the board shall immediately notify the qualified actuary 
engaged by the plan, and such actuary shall, not later than the end of 
the next following month, make such recommendations to the board for 
corrective action as the actuary determines necessary to ensure 
compliance with section 806. Not later than 30 days after receiving 
from the actuary recommendations for corrective actions, the board 
shall notify the applicable authority (in such form and manner as the 
applicable authority may prescribe by regulation through negotiated 
rulemaking) of such recommendations of the actuary for corrective 
action, together with a description of the actions (if any) that the 
board has taken or plans to take in response to such recommendations. 
The board shall thereafter report to the applicable authority, in such 
form and frequency as the applicable authority may specify to the 
board, regarding corrective action taken by the board until the 
requirements of section 806 are met.
    ``(b) Mandatory Termination.--In any case in which--
            ``(1) the applicable authority has been notified under 
        subsection (a) of a failure of an association health plan which 
        is or has been certified under this part and is described in 
        section 806(a)(2) to meet the requirements of section 806 and 
        has not been notified by the board of trustees of the plan that 
        corrective action has restored compliance with such 
        requirements; and
            ``(2) the applicable authority determines that there is a 
        reasonable expectation that the plan will continue to fail to 
        meet the requirements of section 806,
the board of trustees of the plan shall, at the direction of the 
applicable authority, terminate the plan and, in the course of the 
termination, take such actions as the applicable authority may require, 
including satisfying any claims referred to in section 
806(a)(2)(B)(iii) and recovering for the plan any liability under 
subsection (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 
that the affairs of the plan will be, to the maximum extent possible, 
wound up in a manner which will result in timely provision of all 
benefits for which the plan is obligated.

``SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT ASSOCIATION 
              HEALTH PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO 
              HEALTH INSURANCE COVERAGE.

    ``(a) Appointment of Secretary as Trustee for Insolvent Plans.--
Whenever the Secretary determines that an association health plan which 
is or has been certified under this part and which is described in 
section 806(a)(2) will be unable to provide benefits when due or is 
otherwise in a financially hazardous condition, as shall be defined by 
the Secretary by regulation through negotiated rulemaking, the 
Secretary shall, upon notice to the plan, apply to the appropriate 
United States district court for appointment of the Secretary as 
trustee to administer the plan for the duration of the insolvency. The 
plan may appear as a party and other interested persons may intervene 
in the proceedings at the discretion of the court. The court shall 
appoint such Secretary trustee if the court determines that the 
trusteeship is necessary to protect the interests of the participants 
and beneficiaries or providers of medical care or to avoid any 
unreasonable deterioration of the financial condition of the plan. The 
trusteeship of such Secretary shall continue until the conditions 
described in the first sentence of this subsection are remedied or the 
plan is terminated.
    ``(b) Powers as Trustee.--The Secretary, upon appointment as 
trustee under subsection (a), shall have the power--
            ``(1) to do any act authorized by the plan, this title, or 
        other applicable provisions of law to be done by the plan 
        administrator or any trustee of the plan;
            ``(2) to require the transfer of all (or any part) of the 
        assets and records of the plan to the Secretary as trustee;
            ``(3) to invest any assets of the plan which the Secretary 
        holds in accordance with the provisions of the plan, 
        regulations prescribed by the Secretary through negotiated 
        rulemaking, and applicable provisions of law;
            ``(4) to require the sponsor, the plan administrator, any 
        participating employer, and any employee organization 
        representing plan participants to furnish any information with 
        respect to the plan which the Secretary as trustee may 
        reasonably need in order to administer the plan;
            ``(5) to collect for the plan any amounts due the plan and 
        to recover reasonable expenses of the trusteeship;
            ``(6) to commence, prosecute, or defend on behalf of the 
        plan any suit or proceeding involving the plan;
            ``(7) to issue, publish, or file such notices, statements, 
        and reports as may be required by the Secretary by regulation 
        through negotiated rulemaking or required by any order of the 
        court;
            ``(8) to terminate the plan (or provide for its termination 
        accordance with section 809(b)) and liquidate the plan assets, 
        to restore the plan to the responsibility of the sponsor, or to 
        continue the trusteeship;
            ``(9) to provide for the enrollment of plan participants 
        and beneficiaries under appropriate coverage options; and
            ``(10) to do such other acts as may be necessary to comply 
        with this title or any order of the court and to protect the 
        interests of plan participants and beneficiaries and providers 
        of medical care.
    ``(c) Notice of Appointment.--As soon as practicable after the 
Secretary's appointment as trustee, the Secretary shall give notice of 
such appointment to--
            ``(1) the sponsor and plan administrator;
            ``(2) each participant;
            ``(3) each participating employer; and
            ``(4) if applicable, each employee organization which, for 
        purposes of collective bargaining, represents plan 
        participants.
    ``(d) Additional Duties.--Except to the extent inconsistent with 
the provisions of this title, or as may be otherwise ordered by the 
court, the Secretary, upon appointment as trustee under this section, 
shall be subject to the same duties as those of a trustee under section 
704 of title 11, United States Code, and shall have the duties of a 
fiduciary for purposes of this title.
    ``(e) Other Proceedings.--An application by the Secretary under 
this subsection may be filed notwithstanding the pendency in the same 
or any other court of any bankruptcy, mortgage foreclosure, or equity 
receivership proceeding, or any proceeding to reorganize, conserve, or 
liquidate such plan or its property, or any proceeding to enforce a 
lien against property of the plan.
    ``(f) Jurisdiction of Court.--
            ``(1) In general.--Upon the filing of an application for 
        the appointment as trustee or the issuance of a decree under 
        this section, the court to which the application is made shall 
        have exclusive jurisdiction of the plan involved and its 
        property wherever located with the powers, to the extent 
        consistent with the purposes of this section, of a court of the 
        United States having jurisdiction over cases under chapter 11 
        of title 11, United States Code. Pending an adjudication under 
        this section such court shall stay, and upon appointment by it 
        of the Secretary as trustee, such court shall continue the stay 
        of, any pending mortgage foreclosure, equity receivership, or 
        other proceeding to reorganize, conserve, or liquidate the 
        plan, the sponsor, or property of such plan or sponsor, and any 
        other suit against any receiver, conservator, or trustee of the 
        plan, the sponsor, or property of the plan or sponsor. Pending 
        such adjudication and upon the appointment by it of the 
        Secretary as trustee, the court may stay any proceeding to 
        enforce a lien against property of the plan or the sponsor or 
        any other suit against the plan or the sponsor.
            ``(2) Venue.--An action under this section may be brought 
        in the judicial district where the sponsor or the plan 
        administrator resides or does business or where any asset of 
        the plan is situated. A district court in which such action is 
        brought may issue process with respect to such action in any 
        other judicial district.
    ``(g) Personnel.--In accordance with regulations which shall be 
prescribed by the Secretary through negotiated rulemaking, the 
Secretary shall appoint, retain, and compensate accountants, actuaries, 
and other professional service personnel as may be necessary in 
connection with the Secretary's service as trustee under this section.

``SEC. 811. STATE ASSESSMENT AUTHORITY.

    ``(a) In General.--Notwithstanding section 514, a State may impose 
by law a contribution tax on an association health plan described in 
section 806(a)(2), if the plan commenced operations in such State after 
the date of the enactment of the Small Business Access and Choice for 
Entrepreneurs Act of 2003.
    ``(b) Contribution Tax.--For purposes of this section, the term 
`contribution tax' imposed by a State on an association health plan 
means any tax imposed by such State if--
            ``(1) such tax is computed by applying a rate to the amount 
        of premiums or contributions, with respect to individuals 
        covered under the plan who are residents of such State, which 
        are received by the plan from participating employers located 
        in such State or from such individuals;
            ``(2) the rate of such tax does not exceed the rate of any 
        tax imposed by such State on premiums or contributions received 
        by insurers or health maintenance organizations for health 
        insurance coverage offered in such State in connection with a 
        group health plan;
            ``(3) such tax is otherwise nondiscriminatory; and
            ``(4) the amount of any such tax assessed on the plan is 
        reduced by the amount of any tax or assessment otherwise 
        imposed by the State on premiums, contributions, or both 
        received by insurers or health maintenance organizations for 
        health insurance coverage, aggregate excess/stop loss insurance 
        (as defined in section 806(g)(1)), specific excess/stop loss 
        insurance (as defined in section 806(g)(2)), other insurance 
        related to the provision of medical care under the plan, or any 
        combination thereof provided by such insurers or health 
        maintenance organizations in such State in connection with such 
        plan.

``SEC. 812. SPECIAL RULES FOR CHURCH PLANS.

    ``(a) Election for Church Plans.--Notwithstanding section 4(b)(2), 
if a church, a convention or association of churches, or an 
organization described in section 3(33)(C)(i) maintains a church plan 
which is a group health plan (as defined in section 733(a)(1)), and 
such church, convention, association, or organization makes an election 
with respect to such plan under this subsection (in such form and 
manner as the Secretary may by regulation prescribe), then the 
provisions of this section shall apply to such plan, with respect to 
benefits provided under such plan consisting of medical care, as if 
section 4(b)(2) did not contain an exclusion for church plans. Nothing 
in this subsection shall be construed to render any other section of 
this title applicable to church plans, except to the extent that such 
other section is incorporated by reference in this section.
    ``(b) Effect of Election.--
            ``(1) Preemption of state insurance laws regulating covered 
        church plans.--Subject to paragraphs (2) and (3), this section 
        shall supersede any and all State laws which regulate insurance 
        insofar as they may now or hereafter regulate church plans to 
        which this section applies or trusts established under such 
        church plans.
            ``(2) General state insurance regulation unaffected.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B) and paragraph (3), nothing in this 
                section shall be construed to exempt or relieve any 
                person from any provision of State law which regulates 
                insurance.
                    ``(B) Church plans not to be deemed insurance 
                companies or insurers.--Neither a church plan to which 
                this section applies, nor any trust established under 
                such a church plan, shall be deemed to be an insurance 
                company or other insurer or to be engaged in the 
                business of insurance for purposes of any State law 
                purporting to regulate insurance companies or insurance 
                contracts.
            ``(3) Preemption of certain state laws relating to premium 
        rate regulation and benefit mandates.--The provisions of 
        subsections (a)(2)(B) and (b) of section 805 shall apply with 
        respect to a church plan to which this section applies in the 
        same manner and to the same extent as such provisions apply 
        with respect to association health plans.
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) State law.--The term `State law' includes all 
                laws, decisions, rules, regulations, or other State 
                action having the effect of law, of any State. A law of 
                the United States applicable only to the District of 
                Columbia shall be treated as a State law rather than a 
                law of the United States.
                    ``(B) State.--The term `State' includes a State, 
                any political subdivision thereof, or any agency or 
                instrumentality of either, which purports to regulate, 
                directly or indirectly, the terms and conditions of 
                church plans covered by this section.
    ``(c) Requirements for Covered Church Plans.--
            ``(1) Fiduciary rules and exclusive purpose.--A fiduciary 
        shall discharge his duties with respect to a church plan to 
        which this section applies--
                    ``(A) for the exclusive purpose of:
                            ``(i) providing benefits to participants 
                        and their beneficiaries; and
                            ``(ii) defraying reasonable expenses of 
                        administering the plan;
                    ``(B) with the care, skill, prudence and diligence 
                under the circumstances then prevailing that a prudent 
                man acting in a like capacity and familiar with such 
                matters would use in the conduct of an enterprise of a 
                like character and with like aims; and
                    ``(C) in accordance with the documents and 
                instruments governing the plan.
        The requirements of this paragraph shall not be treated as not 
        satisfied solely because the plan assets are commingled with 
        other church assets, to the extent that such plan assets are 
        separately accounted for.
            ``(2) Claims procedure.--In accordance with regulations of 
        the Secretary, every church plan to which this section applies 
        shall--
                    ``(A) provide adequate notice in writing to any 
                participant or beneficiary whose claim for benefits 
                under the plan has been denied, setting forth the 
                specific reasons for such denial, written in a manner 
                calculated to be understood by the participant;
                    ``(B) afford a reasonable opportunity to any 
                participant whose claim for benefits has been denied 
                for a full and fair review by the appropriate fiduciary 
                of the decision denying the claim; and
                    ``(C) provide a written statement to each 
                participant describing the procedures established 
                pursuant to this paragraph.
            ``(3) Annual statements.--In accordance with regulations of 
        the Secretary, every church plan to which this section applies 
        shall file with the Secretary an annual statement--
                    ``(A) stating the names and addresses of the plan 
                and of the church, convention, or association 
                maintaining the plan (and its principal place of 
                business);
                    ``(B) certifying that it is a church plan to which 
                this section applies and that it complies with the 
                requirements of paragraphs (1) and (2);
                    ``(C) identifying the States in which participants 
                and beneficiaries under the plan are or likely will be 
located during the 1-year period covered by the statement; and
                    ``(D) containing a copy of a statement of actuarial 
                opinion signed by a qualified actuary that the plan 
                maintains capital, reserves, insurance, other financial 
                arrangements, or any combination thereof adequate to 
                enable the plan to fully meet all of its financial 
                obligations on a timely basis.
            ``(4) Disclosure.--At the time that the annual statement is 
        filed by a church plan with the Secretary pursuant to paragraph 
        (3), a copy of such statement shall be made available by the 
        Secretary to the State insurance commissioner (or similar 
        official) of any State. The name of each church plan and 
        sponsoring organization filing an annual statement in 
        compliance with paragraph (3) shall be published annually in 
        the Federal Register.
    ``(d) Enforcement.--The Secretary may enforce the provisions of 
this section in a manner consistent with section 502, to the extent 
applicable with respect to actions under section 502(a)(5), and with 
section 3(33)(D), except that, other than for the purpose of seeking a 
temporary restraining order, a civil action may be brought with respect 
to the plan's failure to meet any requirement of this section only if 
the plan fails to correct its failure within the correction period 
described in section 3(33)(D). The other provisions of part 5 (except 
sections 501(a), 503, 512, 514, and 515) shall apply with respect to 
the enforcement and administration of this section.
    ``(e) Definitions and Other Rules.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        section, any term used in this section which is defined in any 
        provision of this title shall have the definition provided such 
        term by such provision.
            ``(2) Seminary students.--Seminary students who are 
        enrolled in an institution of higher learning described in 
        section 3(33)(C)(iv) and who are treated as participants under 
        the terms of a church plan to which this section applies shall 
        be deemed to be employees as defined in section 3(6) if the 
        number of such students constitutes an insignificant portion of 
        the total number of individuals who are treated as participants 
        under the terms of the plan.

``SEC. 813. DEFINITIONS AND RULES OF CONSTRUCTION.

    ``(a) Definitions.--For purposes of this part--
            ``(1) Group health plan.--The term `group health plan' has 
        the meaning provided in section 733(a)(1) (after applying 
        subsection (b) of this section).
            ``(2) Medical care.--The term `medical care' has the 
        meaning provided in section 733(a)(2).
            ``(3) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning provided in section 
        733(b)(1).
            ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning provided in section 733(b)(2).
            ``(5) Applicable authority.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `applicable authority' 
                means, in connection with an association health plan--
                            ``(i) the State recognized pursuant to 
                        subsection (c) of section 506 as the State to 
                        which authority has been delegated in 
                        connection with such plan; or
                            ``(ii) if there is no State referred to in 
                        clause (i), the Secretary.
                    ``(B) Exceptions.--
                            ``(i) Joint authorities.--Where such term 
                        appears in section 808(3), section 807(e) (in 
                        the first instance), section 809(a) (in the 
                        second instance), section 809(a) (in the fourth 
                        instance), and section 809(b)(1), such term 
                        means, in connection with an association health 
                        plan, the Secretary and the State referred to 
                        in subparagraph (A)(i) (if any) in connection 
                        with such plan.
                            ``(ii) Regulatory authorities.--Where such 
                        term appears in section 802(a) (in the first 
                        instance), section 802(d), section 802(e), 
                        section 803(d), section 805(a)(5), section 
                        806(a)(2), section 806(b), section 806(c), 
                        section 806(d), paragraphs (1)(A) and (2)(A) of 
                        section 806(g), section 806(h), section 806(i), 
                        section 806(j), section 807(a) (in the second 
                        instance), section 807(b), section 807(d), 
                        section 807(e) (in the second instance), 
                        section 808 (in the matter after paragraph 
                        (3)), and section 809(a) (in the third 
                        instance), such term means, in connection with 
                        an association health plan, the Secretary.
            ``(6) Health status-related factor.--The term `health 
        status-related factor' has the meaning provided in section 
        733(d)(2).
            ``(7) Individual market.--
                    ``(A) In general.--The term `individual market' 
                means the market for health insurance coverage offered 
                to individuals other than in connection with a group 
                health plan.
                    ``(B) Treatment of very small groups.--
                            ``(i) In general.--Subject to clause (ii), 
                        such term includes coverage offered in 
                        connection with a group health plan that has 
                        fewer than 2 participants as current employees 
                        or participants described in section 732(d)(3) 
                        on the first day of the plan year.
                            ``(ii) State exception.--Clause (i) shall 
                        not apply in the case of health insurance 
                        coverage offered in a State if such State 
                        regulates the coverage described in such clause 
                        in the same manner and to the same extent as 
                        coverage in the small group market (as defined 
                        in section 2791(e)(5) of the Public Health 
                        Service Act) is regulated by such State.
            ``(8) Participating employer.--The term `participating 
        employer' means, in connection with an association health plan, 
        any employer, if any individual who is an employee of such 
        employer, a partner in such employer, or a self-employed 
        individual who is such employer (or any dependent, as defined 
        under the terms of the plan, of such individual) is or was 
        covered under such plan in connection with the status of such 
        individual as such an employee, partner, or self-employed 
        individual in relation to the plan.
            ``(9) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of title XXVII of the Public Health Service Act 
        for the State involved with respect to such issuer.
            ``(10) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries or meets such reasonable standards and qualifications 
        as the Secretary may provide by regulation through negotiated 
rulemaking.
            ``(11) Affiliated member.--The term `affiliated member' 
        means, in connection with a sponsor--
                    ``(A) a person who is otherwise eligible to be a 
                member of the sponsor but who elects an affiliated 
                status with the sponsor,
                    ``(B) in the case of a sponsor with members which 
                consist of associations, a person who is a member of 
                any such association and elects an affiliated status 
                with the sponsor, or
                    ``(C) in the case of an association health plan in 
                existence on the date of the enactment of the Small 
                Business Access and Choice for Entrepreneurs Act of 
                2003, a person eligible to be a member of the sponsor 
                or one of its member associations.
            ``(12) Large employer.--The term `large employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who employed an average of at least 51 
        employees on business days during the preceding calendar year 
        and who employs at least 2 employees on the first day of the 
        plan year.
            ``(13) Small employer.--The term `small employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who is not a large employer.
    ``(b) Rules of Construction.--
            ``(1) Employers and employees.--For purposes of determining 
        whether a plan, fund, or program is an employee welfare benefit 
        plan which is an association health plan, and for purposes of 
        applying this title in connection with such plan, fund, or 
        program so determined to be such an employee welfare benefit 
        plan--
                    ``(A) in the case of a partnership, the term 
                `employer' (as defined in section (3)(5)) includes the 
                partnership in relation to the partners, and the term 
                `employee' (as defined in section (3)(6)) includes any 
                partner in relation to the partnership; and
                    ``(B) in the case of a self-employed individual, 
                the term `employer' (as defined in section 3(5)) and 
                the term `employee' (as defined in section 3(6)) shall 
                include such individual.
            ``(2) Plans, funds, and programs treated as employee 
        welfare benefit plans.--In the case of any plan, fund, or 
        program which was established or is maintained for the purpose 
        of providing medical care (through the purchase of insurance or 
        otherwise) for employees (or their dependents) covered 
        thereunder and which demonstrates to the Secretary that all 
        requirements for certification under this part would be met 
        with respect to such plan, fund, or program if such plan, fund, 
        or program were a group health plan, such plan, fund, or 
        program shall be treated for purposes of this title as an 
        employee welfare benefit plan on and after the date of such 
        demonstration.''.
    (b) Conforming Amendments to Preemption Rules.--
            (1) Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is 
        amended by adding at the end the following new subparagraph:
    ``(E) The preceding subparagraphs of this paragraph do not apply 
with respect to any State law in the case of an association health plan 
which is certified under part 8.''.
            (2) Section 514 of such Act (29 U.S.C. 1144) is amended--
                    (A) in subsection (b)(4), by striking ``Subsection 
                (a)'' and inserting ``Subsections (a) and (d)'';
                    (B) in subsection (b)(5), by striking ``subsection 
                (a)'' in subparagraph (A) and inserting ``subsection 
                (a) of this section and subsections (a)(2)(B) and (b) 
                of section 805'', and by striking ``subsection (a)'' in 
                subparagraph (B) and inserting ``subsection (a) of this 
                section or subsection (a)(2)(B) or (b) of section 
                805'';
                    (C) by redesignating subsection (d) as subsection 
                (e); and
                    (D) by inserting after subsection (c) the following 
                new subsection:
    ``(d)(1) Except as provided in subsection (b)(4), the provisions of 
this title shall supersede any and all State laws insofar as they may 
now or hereafter preclude, or have the effect of precluding, a health 
insurance issuer from offering health insurance coverage in connection 
with an association health plan which is certified under part 8.
    ``(2) Except as provided in paragraphs (4) and (5) of subsection 
(b) of this section--
            ``(A) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan 
        certified under part 8 to a participating employer operating in 
        such State, the provisions of this title shall supersede any 
        and all laws of such State insofar as they may preclude a 
        health insurance issuer from offering health insurance coverage 
        of the same policy type to other employers operating in the 
        State which are eligible for coverage under such association 
        health plan, whether or not such other employers are 
        participating employers in such plan.
            ``(B) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan in a 
        State and the filing, with the applicable State authority, of 
        the policy form in connection with such policy type is approved 
        by such State authority, the provisions of this title shall 
        supersede any and all laws of any other State in which health 
        insurance coverage of such type is offered, insofar as they may 
        preclude, upon the filing in the same form and manner of such 
        policy form with the applicable State authority in such other 
        State, the approval of the filing in such other State.
    ``(3) For additional provisions relating to association health 
plans, see subsections (a)(2)(B) and (b) of section 805.
    ``(4) For purposes of this subsection, the term `association health 
plan' has the meaning provided in section 801(a), and the terms `health 
insurance coverage', `participating employer', and `health insurance 
issuer' have the meanings provided such terms in section 811, 
respectively.''.
            (3) Section 514(b)(6)(A) of such Act (29 U.S.C. 
        1144(b)(6)(A)) is amended--
                    (A) in clause (i)(II), by striking ``and'' at the 
                end;
                    (B) in clause (ii), by inserting ``and which does 
                not provide medical care (within the meaning of section 
                733(a)(2)),'' after ``arrangement,'', and by striking 
                ``title.'' and inserting ``title, and''; and
                    (C) by adding at the end the following new clause:
            ``(iii) subject to subparagraph (E), in the case of any 
        other employee welfare benefit plan which is a multiple 
        employer welfare arrangement and which provides medical care 
        (within the meaning of section 733(a)(2)), any law of any State 
        which regulates insurance may apply.''.
            (4) Section 514(e) of such Act (as redesignated by 
        paragraph (2)(C)) is amended--
                    (A) by striking ``Nothing'' and inserting ``(1) 
                Except as provided in paragraph (2), nothing''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(2) Nothing in any other provision of law enacted on or after the 
date of the enactment of the Small Business Access and Choice for 
Entrepreneurs Act of 2003 shall be construed to alter, amend, modify, 
invalidate, impair, or supersede any provision of this title, except by 
specific cross-reference to the affected section.''.
    (c) Plan Sponsor.--Section 3(16)(B) of such Act (29 U.S.C. 
102(16)(B)) is amended by adding at the end the following new sentence: 
``Such term also includes a person serving as the sponsor of an 
association health plan under part 8.''.
    (d) Disclosure of Solvency Protections Related to Self-Insured and 
Fully Insured Options Under Association Health Plans.--Section 102(b) 
of such Act (29 U.S.C. 102(b)) is amended by adding at the end the 
following: ``An association health plan shall include in its summary 
plan description, in connection with each benefit option, a description 
of the form of solvency or guarantee fund protection secured pursuant 
to this Act or applicable State law, if any.''.
    (e) Savings Clause.--Section 731(c) of such Act is amended by 
inserting ``or part 8'' after ``this part''.
    (f) Report to the Congress Regarding Certification of Self-Insured 
Association Health Plans.--Not later than January 1, 2008, the 
Secretary of Labor shall report to the Committee on Education and the 
Workforce of the House of Representatives and the Committee on Health, 
Education, Labor, and Pensions of the Senate the effect association 
health plans have had, if any, on reducing the number of uninsured 
individuals.
    (g) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 734 the following new items:

           ``Part 8--Rules Governing Association Health Plans

``Sec. 801. Association health plans.
``Sec. 802. Certification of association health plans.
``Sec. 803. Requirements relating to sponsors and boards of trustees.
``Sec. 804. Participation and coverage requirements.
``Sec. 805. Other requirements relating to plan documents, contribution 
                            rates, and benefit options.
``Sec. 806. Maintenance of reserves and provisions for solvency for 
                            plans providing health benefits in addition 
                            to health insurance coverage.
``Sec. 807. Requirements for application and related requirements.
``Sec. 808. Notice requirements for voluntary termination.
``Sec. 809. Corrective actions and mandatory termination.
``Sec. 810. Trusteeship by the Secretary of insolvent association 
                            health plans providing health benefits in 
                            addition to health insurance coverage.
``Sec. 811. State assessment authority.
``Sec. 812. Special rules for church plans.
``Sec. 813. Definitions and rules of construction.''.

SEC. 403. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

    Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i), by inserting ``for any plan year of any 
        such plan, or any fiscal year of any such other arrangement,'' 
        after ``single employer'', and by inserting ``during such year 
        or at any time during the preceding 1-year period'' after 
        ``control group'';
            (2) in clause (iii)--
                    (A) by striking ``common control shall not be based 
                on an interest of less than 25 percent'' and inserting 
                ``an interest of greater than 25 percent may not be 
                required as the minimum interest necessary for common 
                control''; and
                    (B) by striking ``similar to'' and inserting 
                ``consistent and coextensive with'';
            (3) by redesignating clauses (iv) and (v) as clauses (v) 
        and (vi), respectively; and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in determining, after the application of clause (i), 
        whether benefits are provided to employees of two or more 
        employers, the arrangement shall be treated as having only one 
        participating employer if, after the application of clause (i), 
        the number of individuals who are employees and former 
        employees of any one participating employer and who are covered 
        under the arrangement is greater than 75 percent of the 
        aggregate number of all individuals who are employees or former 
        employees of participating employers and who are covered under 
        the arrangement;''.

SEC. 404. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY BARGAINED 
              ARRANGEMENTS.

    (a) In General.--Section 3(40)(A)(i) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1002(40)(A)(i)) is amended to 
read as follows:
            ``(i)(I) under or pursuant to one or more collective 
        bargaining agreements which are reached pursuant to collective 
        bargaining described in section 8(d) of the National Labor 
        Relations Act (29 U.S.C. 158(d)) or paragraph Fourth of section 
        2 of the Railway Labor Act (45 U.S.C. 152, paragraph Fourth) or 
        which are reached pursuant to labor-management negotiations 
        under similar provisions of State public employee relations 
        laws, and (II) in accordance with subparagraphs (C), (D), and 
        (E);''.
    (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 1002(40)) is 
amended by adding at the end the following new subparagraphs:
    ``(C) For purposes of subparagraph (A)(i)(II), a plan or other 
arrangement shall be treated as established or maintained in accordance 
with this subparagraph only if the following requirements are met:
            ``(i) The plan or other arrangement, and the employee 
        organization or any other entity sponsoring the plan or other 
        arrangement, do not--
                    ``(I) utilize the services of any licensed 
                insurance agent or broker for soliciting or enrolling 
                employers or individuals as participating employers or 
                covered individuals under the plan or other 
                arrangement; or
                    ``(II) pay any type of compensation to a person, 
                other than a full time employee of the employee 
                organization (or a member of the organization to the 
                extent provided in regulations prescribed by the 
                Secretary through negotiated rulemaking), that is 
                related either to the volume or number of employers or 
                individuals solicited or enrolled as participating 
                employers or covered individuals under the plan or 
                other arrangement, or to the dollar amount or size 
of the contributions made by participating employers or covered 
individuals to the plan or other arrangement;
        except to the extent that the services used by the plan, 
        arrangement, organization, or other entity consist solely of 
        preparation of documents necessary for compliance with the 
        reporting and disclosure requirements of part 1 or 
        administrative, investment, or consulting services unrelated to 
        solicitation or enrollment of covered individuals.
            ``(ii) As of the end of the preceding plan year, the number 
        of covered individuals under the plan or other arrangement who 
        are neither--
                    ``(I) employed within a bargaining unit covered by 
                any of the collective bargaining agreements with a 
                participating employer (nor covered on the basis of an 
                individual's employment in such a bargaining unit); nor
                    ``(II) present employees (or former employees who 
                were covered while employed) of the sponsoring employee 
                organization, of an employer who is or was a party to 
                any of the collective bargaining agreements, or of the 
                plan or other arrangement or a related plan or 
                arrangement (nor covered on the basis of such present 
                or former employment);
        does not exceed 15 percent of the total number of individuals 
        who are covered under the plan or arrangement and who are 
        present or former employees who are or were covered under the 
        plan or arrangement pursuant to a collective bargaining 
        agreement with a participating employer. The requirements of 
        the preceding provisions of this clause shall be treated as 
        satisfied if, as of the end of the preceding plan year, such 
        covered individuals are comprised solely of individuals who 
        were covered individuals under the plan or other arrangement as 
        of the date of the enactment of the Small Business Access and 
        Choice for Entrepreneurs Act of 2003 and, as of the end of the 
        preceding plan year, the number of such covered individuals 
        does not exceed 25 percent of the total number of present and 
        former employees enrolled under the plan or other arrangement.
            ``(iii) The employee organization or other entity 
        sponsoring the plan or other arrangement certifies to the 
        Secretary each year, in a form and manner which shall be 
        prescribed by the Secretary through negotiated rulemaking that 
        the plan or other arrangement meets the requirements of clauses 
        (i) and (ii).
    ``(D) For purposes of subparagraph (A)(i)(II), a plan or 
arrangement shall be treated as established or maintained in accordance 
with this subparagraph only if--
            ``(i) all of the benefits provided under the plan or 
        arrangement consist of health insurance coverage; or
            ``(ii)(I) the plan or arrangement is a multiemployer plan; 
        and
            ``(II) the requirements of clause (B) of the proviso to 
        clause (5) of section 302(c) of the Labor Management Relations 
        Act, 1947 (29 U.S.C. 186(c)) are met with respect to such plan 
        or other arrangement.
    ``(E) For purposes of subparagraph (A)(i)(II), a plan or 
arrangement shall be treated as established or maintained in accordance 
with this subparagraph only if--
            ``(i) the plan or arrangement is in effect as of the date 
        of the enactment of the Small Business Access and Choice for 
        Entrepreneurs Act of 2003; or
            ``(ii) the employee organization or other entity sponsoring 
        the plan or arrangement--
                    ``(I) has been in existence for at least 3 years; 
                or
                    ``(II) demonstrates to the satisfaction of the 
                Secretary that the requirements of subparagraphs (C) 
                and (D) are met with respect to the plan or other 
                arrangement.''.
    (c) Conforming Amendments to Definitions of Participant and 
Beneficiary.--Section 3(7) of such Act (29 U.S.C. 1002(7)) is amended 
by adding at the end the following new sentence: ``Such term includes 
an individual who is a covered individual described in paragraph 
(40)(C)(ii).''.

SEC. 405. ENFORCEMENT PROVISIONS.

    (a) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1131) is amended--
            (1) by inserting ``(a)'' after ``Sec. 501.''; and
            (2) by adding at the end the following new subsection:
    ``(b) Any person who willfully falsely represents, to any employee, 
any employee's beneficiary, any employer, the Secretary, or any State, 
a plan or other arrangement established or maintained for the purpose 
of offering or providing any benefit described in section 3(1) to 
employees or their beneficiaries as--
            ``(1) being an association health plan which has been 
        certified under part 8;
            ``(2) having been established or maintained under or 
        pursuant to one or more collective bargaining agreements which 
        are reached pursuant to collective bargaining described in 
        section 8(d) of the National Labor Relations Act (29 U.S.C. 
        158(d)) or paragraph Fourth of section 2 of the Railway Labor 
        Act (45 U.S.C. 152, paragraph Fourth) or which are reached 
        pursuant to labor-management negotiations under similar 
        provisions of State public employee relations laws; or
            ``(3) being a plan or arrangement with respect to which the 
        requirements of subparagraph (C), (D), or (E) of section 3(40) 
        are met;
shall, upon conviction, be imprisoned not more than 5 years, be fined 
under title 18, United States Code, or both.''.
    (b) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
    ``(n)(1) Subject to paragraph (2), upon application by the 
Secretary showing the operation, promotion, or marketing of an 
association health plan (or similar arrangement providing benefits 
consisting of medical care (as defined in section 733(a)(2))) that--
            ``(A) is not certified under part 8, is subject under 
        section 514(b)(6) to the insurance laws of any State in which 
        the plan or arrangement offers or provides benefits, and is not 
        licensed, registered, or otherwise approved under the insurance 
        laws of such State; or
            ``(B) is an association health plan certified under part 8 
        and is not operating in accordance with the requirements under 
        part 8 for such certification,
a district court of the United States shall enter an order requiring 
that the plan or arrangement cease activities.
    ``(2) Paragraph (1) shall not apply in the case of an association 
health plan or other arrangement if the plan or arrangement shows 
that--
            ``(A) all benefits under it referred to in paragraph (1) 
        consist of health insurance coverage; and
            ``(B) with respect to each State in which the plan or 
        arrangement offers or provides benefits, the plan or 
        arrangement is operating in accordance with applicable State 
        laws that are not superseded under section 514.
    ``(3) The court may grant such additional equitable relief, 
including any relief available under this title, as it deems necessary 
to protect the interests of the public and of persons having claims for 
benefits against the plan.''.
    (c) Responsibility for Claims Procedure.--Section 503 of such Act 
(29 U.S.C. 1133) is amended--
            (1) by inserting ``(a) In General.--'' after ``Sec. 503.''; 
        and
            (2) by adding at the end the following new subsection:
    ``(b) Association Health Plans.--The terms of each association 
health plan which is or has been certified under part 8 shall require 
the board of trustees or the named fiduciary (as applicable) to ensure 
that the requirements of this section are met in connection with claims 
filed under the plan.''.

SEC. 406. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

    Section 506 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
    ``(d) Responsibility of States With Respect to Association Health 
Plans.--
            ``(1) Agreements with states.--A State may enter into an 
        agreement with the Secretary for delegation to the State of 
        some or all of--
                    ``(A) the Secretary's authority under sections 502 
                and 504 to enforce the requirements for certification 
                under part 8;
                    ``(B) the Secretary's authority to certify 
                association health plans under part 8 in accordance 
                with regulations of the Secretary applicable to 
                certification under part 8; or
                    ``(C) any combination of the Secretary's authority 
                authorized to be delegated under subparagraphs (A) and 
                (B).
            ``(2) Delegations.--Any department, agency, or 
        instrumentality of a State to which authority is delegated 
        pursuant to an agreement entered into under this paragraph may, 
        if authorized under State law and to the extent consistent with 
        such agreement, exercise the powers of the Secretary under this 
        title which relate to such authority.
            ``(3) Recognition of primary domicile state.--In entering 
        into any agreement with a State under subparagraph (A), the 
        Secretary shall ensure that, as a result of such agreement and 
        all other agreements entered into under subparagraph (A), only 
        one State will be recognized, with respect to any particular 
        association health plan, as the State to which all authority 
        has been delegated pursuant to such agreements in connection 
        with such plan. In carrying out this paragraph, the Secretary 
        shall take into account the places of residence of the 
        participants and beneficiaries under the plan and the State in 
        which the trust is maintained.''.

SEC. 407. EFFECTIVE DATE AND TRANSITIONAL AND OTHER RULES.

    (a) Effective Date.--The amendments made by sections 101, 104, and 
105 shall take effect on January 1, 2005. The amendments made by 
sections 102 and 103 shall take effect on the date of the enactment of 
this Act. The Secretary of Labor shall first issue all regulations 
necessary to carry out the amendments made by this subtitle before 
January 1, 2005. Such regulations shall be issued through negotiated 
rulemaking.
    (b) Exception.--Section 801(a)(2) of the Employee Retirement Income 
Security Act of 1974 (added by section 101) does not apply in 
connection with an association health plan (certified under part 8 of 
subtitle B of title I of such Act) existing on the date of the 
enactment of this Act, if no benefits provided thereunder as of the 
date of the enactment of this Act consist of health insurance coverage 
(as defined in section 733(b)(1) of such Act).
    (c) Treatment of Certain Existing Health Benefits Programs.--
            (1) In general.--In any case in which, as of the date of 
        the enactment of this Act, an arrangement is maintained in a 
        State for the purpose of providing benefits consisting of 
        medical care for the employees and beneficiaries of its 
        participating employers, at least 200 participating employers 
        make contributions to such arrangement, such arrangement has 
        been in existence for at least 10 years, and such arrangement 
        is licensed under the laws of one or more States to provide 
        such benefits to its participating employers, upon the filing 
        with the applicable authority (as defined in section 813(a)(5) 
        of the Employee Retirement Income Security Act of 1974 (as 
        amended by this Act)) by the arrangement of an application for 
        certification of the arrangement under part 8 of subtitle B of 
        title I of such Act--
                    (A) such arrangement shall be deemed to be a group 
                health plan for purposes of title I of such Act;
                    (B) the requirements of sections 801(a)(1) and 
                803(a)(1) of the Employee Retirement Income Security 
                Act of 1974 shall be deemed met with respect to such 
                arrangement;
                    (C) the requirements of section 803(b) of such Act 
                shall be deemed met, if the arrangement is operated by 
                a board of directors which--
                            (i) is elected by the participating 
                        employers, with each employer having one vote; 
                        and
                            (ii) has complete fiscal control over the 
                        arrangement and which is responsible for all 
                        operations of the arrangement;
                    (D) the requirements of section 804(a) of such Act 
                shall be deemed met with respect to such arrangement; 
                and
                    (E) the arrangement may be certified by any 
                applicable authority with respect to its operations in 
                any State only if it operates in such State on the date 
                of certification.
        The provisions of this subsection shall cease to apply with 
        respect to any such arrangement at such time after the date of 
        the enactment of this Act as the applicable requirements of 
        this subsection are not met with respect to such arrangement.
            (2) Definitions.--For purposes of this subsection, the 
        terms ``group health plan'', ``medical care'', and 
        ``participating employer'' shall have the meanings provided in 
        section 813 of the Employee Retirement Income Security Act of 
        1974, except that the reference in paragraph (7) of such 
        section to an ``association health plan'' shall be deemed a 
        reference to an arrangement referred to in this subsection.

        TITLE V--IMPROVEMENT TO ACCESS AND CHOICE OF HEALTH CARE

SEC. 501. REFUNDABLE CREDIT FOR HEALTH INSURANCE COSTS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. HEALTH INSURANCE COSTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle an amount 
equal to the amount paid during the taxable year for qualified health 
insurance for coverage of the taxpayer, his spouse, and dependents.
    ``(b) Limitations.--
            ``(1) Maximum credit.--
                    ``(A) In general.--The amount allowed as a credit 
                under subsection (a) to the taxpayer for the taxable 
                year shall not exceed the sum of the monthly 
                limitations for months during such taxable year.
                    ``(B) Monthly limitation.--The monthly limitation 
                for any month is the amount equal to \1/12\ of the 
                lesser of--
                            ``(i) the product of $1,000 multiplied by 
                        the number of individuals taken into account 
                        under subsection (a) who are covered under 
                        qualified health insurance as of the first day 
                        of such month, or
                            ``(ii) $3,000.
            ``(2) Employer subsidized coverage.--Subsection (a) shall 
        not apply to amounts paid for coverage of any individual for 
        any month for which such individual participates in any 
        subsidized health plan maintained by any employer of the 
        taxpayer or of the spouse of the taxpayer. The rule of the last 
        sentence of section 162(l)(2)(B) shall apply for purposes of 
        the preceding sentence.
    ``(c) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--The term `qualified health insurance' 
        means insurance which constitutes medical care if--
                    ``(A) there is an annual deductible which is not 
                more than the highest deductible permitted under--
                            ``(i) section 220(c)(2)(A)(i) in the case 
                        of self-only coverage, or
                            ``(ii) section 220(c)(2)(A)(ii) in the case 
                        of family coverage,
                    ``(B) the annual out-of-pocket expenses required to 
                be paid (other than for premiums) for covered benefits 
                does not exceed the amounts specified in section 
                220(c)(2)(A)(iii),
                    ``(C) there is no exclusion from, or limitation on, 
                coverage for any preexisting medical condition of any 
                applicant who, on the date the application is made, has 
                been continuously insured during the 1-year period 
                ending on the date of the application under--
                            ``(i) qualified health insurance 
                        (determined without regard to this 
                        subparagraph), or
                            ``(ii) a program described in--
                                    ``(I) title XVIII or XIX of the 
                                Social Security Act,
                                    ``(II) chapter 55 of title 10, 
                                United States Code,
                                    ``(III) chapter 17 of title 38, 
                                United States Code,
                                    ``(IV) chapter 89 of title 5, 
                                United States Code, or
                                    ``(V) the Indian Health Care 
                                Improvement Act, and
                    ``(D) in the case of each applicant who has not 
                been continuously so insured during the 1-year period 
                ending on the date the application is made, the 
                exclusion from, or limitation on, coverage for any 
                preexisting medical condition does not extend beyond 
                the period after such date equal to the lesser of--
                            ``(i) the number of months immediately 
                        prior to such date during which the individual 
                        was not so insured since the illness or 
                        condition in question was first diagnosed, or
                            ``(ii) 1 year.
            ``(2) Exclusion of certain plans.--Such term does not 
        include--
                    ``(A) insurance if substantially all of its 
                coverage is coverage described in section 220(c)(1)(B),
                    ``(B) insurance under a program described in 
                paragraph (1)(C)(ii).
            ``(3) Transition rule for 2003.--In the case of 
        applications made during 2003, the requirements of 
        subparagraphs (C) and (D) of paragraph (1) are met only if the 
        insurance does not exclude from coverage, or limit coverage 
        for, any preexisting medical condition of any applicant.
    ``(d) Special Rules.--
            ``(1) Coordination with medical deduction, etc.--Any amount 
        paid by a taxpayer for insurance to which subsection (a) 
        applies shall not be taken into account in computing the amount 
        allowable to the taxpayer as a credit under section 35 or as a 
        deduction under section 162(l) or 213(a).
            ``(2) Denial of credit to dependents.--No credit shall be 
        allowed under this section to any individual with respect to 
        whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
            ``(3) Married couples must file joint return.--
                    ``(A) In general.--If the taxpayer is married at 
                the close of the taxable year, the credit shall be 
                allowed under subsection (a) only if the taxpayer and 
                his spouse file a joint return for the taxable year.
                    ``(B) Marital status; certain married individuals 
                living apart.--Rules similar to the rules of paragraphs 
                (3) and (4) of section 21(e) shall apply for purposes 
                of this paragraph.
            ``(4) Verification of coverage, etc.--No credit shall be 
        allowed under this section to any individual unless such 
        individual's coverage under qualified health insurance, and the 
        amount paid for such coverage, are verified in such manner as 
        the Secretary may prescribe.
            ``(5) Cost-of-living adjustment.--In the case of any 
        taxable year beginning in a calendar year after 2003, each 
        dollar amount contained in subsection (b)(1)(B) shall be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins by substituting `calendar year 
                2002' for `calendar year 1992' in subparagraph (B) 
                thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $10.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``or 
        36'' after ``section 35''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 35 the following new item:

                              ``Sec. 36. Health insurance costs.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 502. EXCLUSION FOR EMPLOYER PAYMENTS MADE TO COMPENSATE EMPLOYEES 
              WHO ELECT NOT TO PARTICIPATE IN EMPLOYER-SUBSIDIZED 
              HEALTH PLANS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by inserting after section 139 the 
following new section:

``SEC. 139A. TREATMENT OF COMPENSATING PAYMENTS MADE FOR EMPLOYEES WHO 
              ELECT NOT TO PARTICIPATE IN EMPLOYER-SUBSIDIZED HEALTH 
              PLANS.

    ``(a) In General.--Gross income of an eligible employee shall not 
include the amount of any compensating coverage payment made by an 
employer of such employee for such employee's benefit.
    ``(b) Eligible Employee.--For purposes of this section, the term 
`eligible employee' means any employee who is eligible to participate 
in any subsidized health plan of an employer for any period and who 
elects not to participate in any subsidized health plan of such 
employer for such period.
    ``(c) Compensating Coverage Payment.--For purposes of this section, 
the term `compensating coverage payment' means--
            ``(1) any payment made by the employer for qualified health 
        insurance specified by the employee (for any period for which 
        the employee is described in subsection (b)) which covers all 
        of the individuals who, but for the election referred to in 
        subsection (b), would be covered under the subsidized health 
        plan of the employer, and
            ``(2) any payment made by the employer to any medical 
        savings account of such employee or spouse for a period for 
which the employee is covered by qualified health insurance.
    ``(d) Qualified Health Insurance.--For purposes of this section, 
the term `qualified health insurance' has the meaning given such term 
in section 36(c).
    ``(e) Employer Participation.--
            ``(1) In general.--This section shall apply to a 
        compensating coverage payment made by an employer for an 
        employee's benefit only if--
                    ``(A) the employer, and all other employers which 
                are members of any controlled group which includes such 
                employer, agree to make such payments to all their 
                eligible employees,
                    ``(B) the amount of such payment is not less than 
                the employer health plan contribution for such period 
                with respect to the employee, and
                    ``(C) the employer permits the election referred to 
                in subsection (b) to be made by employees--
                            ``(i) at the commencement of employment 
                        with the employer, and
                            ``(ii) during open enrollment periods (not 
                        less frequently than annually) of at least 30 
                        days.
            ``(2) Exception for certain employees.--Paragraph (1) shall 
        not apply to--
                    ``(A) any employee who is covered under a 
                subsidized health plan of another employer of such 
                employee or of an employer of such employee's spouse,
                    ``(B) any employee who normally works less than 25 
                hours per week,
                    ``(C) any employee who normally works during not 
                more than 6 months during any year,
                    ``(D) any employee who has not attained age 21, and
                    ``(E) except to the extent provided in regulations, 
                any employee who is included in a unit of employees 
                covered by an agreement which the Secretary of Labor 
                finds to be a collective bargaining agreement between 
                employee representatives and the employer.
            ``(3) Controlled groups.--Rules similar to the rules of 
        subclauses (II) and (III) of paragraph (4)(D)(iii) shall apply 
        for purposes of paragraph (1)(A).
            ``(4) Employer health plan contribution.--For purposes of 
        this section--
                    ``(A) In general.--The term `employer health plan 
                contribution' means the applicable premium for the 
                employee reduced by the employee's share of such 
                premium.
                    ``(B) Applicable premium.--Except as provided in 
                subparagraph (D), the term `applicable premium' means 
                an amount which is not less than 98 percent of--
                            ``(i) the applicable premium (as defined in 
                        section 4980B(f)(4)) for the employee, or
                            ``(ii) if an election under subparagraph 
                        (D) is in effect with respect to an employee, 
                        the applicable premium determined under 
                        subparagraph (D).
                    ``(C) Employee's share.--The term `employee's 
                share' means, with respect to the applicable premium 
                for any employee, the amount of the cost to the plan 
                which is paid by the similarly situated beneficiaries 
                who are taken into account in determining such premium 
                for such employee.
                    ``(D) Authority to use age, sex, and geography in 
                determining contribution.--
                            ``(i) In general.--An employer may elect to 
                        determine the applicable premium for an 
                        employee on an actuarial basis taking into 
                        account age, sex, and geography of the employee 
                        and similarly situated beneficiaries.
                            ``(ii) Determination of employee's share.--
                        In the case of an employer who determines the 
                        applicable premium under clause (i), the 
                        employee's share of such premium shall be the 
                        same percentage of such premium as the 
                        employee's share of the applicable premium 
                        determined without regard to clause (i).
                            ``(iii) Consistency required.--
                                    ``(I) In general.--Except as 
                                provided in subclause (III), an 
                                employer may determine the applicable 
                                premium under this subparagraph for any 
                                employee only if such employer, and all 
                                other employers which are members of 
                                any controlled group which includes 
                                such employer, elect to determine the 
                                applicable premium under this 
                                subparagraph for all their employees.
                                    ``(II) Controlled group.--All 
                                persons treated as a single employer 
                                under subsection (a) or (b) of section 
                                52 or subsection (m) or (o) of section 
                                414 shall be treated as members of a 
                                controlled group for purposes of 
                                subclause (I).
                                    ``(III) Treatment of separate lines 
                                of business.--If an employer is treated 
                                under section 414(r) as operating 
                                separate lines of business during any 
                                taxable year, subclause (I) shall not 
                                apply to employees employed in such 
                                separate lines of business.
    ``(f) Special Rule for Medical Savings Account Contributions.--
Section 220(b)(5) shall not apply to an employer contribution which is 
excludable from gross income under subsection (a).
    ``(g) Exclusion Applicable in Determining Employment Tax 
Liability.--The exclusion under this section shall be treated for 
purposes of subtitle C in the same manner as the exclusion under 
section 106.''
    (b) Employer Health Plan Contribution To Be Reported on W-2.--
Subsection (a) of section 6051 of such Code (relating to receipts to 
employees) is amended by striking ``and'' at the end of paragraph (10), 
by striking the period at the end of paragraph (11) and inserting a 
comma, and by inserting after paragraph (11) the following new 
paragraphs:
            ``(12) the amount of the employer health plan contribution 
        (as defined in section 139(c)(3)), and
            ``(13) the amount of compensating coverage payment (as 
        defined in section 139(c)(1)).''
    (c) Clerical Amendment.--The table of sections for such part III is 
amended by inserting after the item relating to section 139 the 
following new item:

                              ``Sec. 139A. Treatment of compensating 
                                        payments made for employees who 
                                        elect not to participate in 
                                        employer-subsidized health 
                                        plans.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 503. EXPANDED AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.

    (a) Repeal of Limitations on Number of Medical Savings Accounts.--
            (1) In general.--Subsections (i) and (j) of section 220 of 
        the Internal Revenue Code of 1986 are hereby repealed.
            (2) Conforming amendments.--
                    (A) Paragraph (1) of section 220(c) of such Code is 
                amended by striking subparagraph (D).
                    (B) Section 138 of such Code is amended by striking 
                subsection (f).
    (b) All Employers May Offer Medical Savings Accounts.--
            (1) In general.--Subclause (I) of section 220(c)(1)(A)(iii) 
        of such Code (defining eligible individual) is amended by 
        striking ``and such employer is a small employer''.
            (2) Conforming amendments.--
                    (A) Paragraph (1) of section 220(c) of such Code is 
                amended by striking subparagraph (C).
                    (B) Subsection (c) of section 220 of such Code is 
                amended by striking paragraph (4) and by redesignating 
                paragraph (5) as paragraph (4).
    (c) Increase in Amount of Deduction Allowed for Contributions to 
Medical Savings Accounts.--
            (1) In general.--Paragraph (2) of section 220(b) of such 
        Code is amended to read as follows:
            ``(2) Monthly limitation.--The monthly limitation for any 
        month is the amount equal to \1/12\ of the annual deductible 
        (as of the first day of such month) of the individual's 
        coverage under the high deductible health plan.''.
            (2) Conforming amendment.--Clause (ii) of section 
        220(d)(1)(A) of such Code is amended by striking ``75 percent 
        of''.
    (d) Both Employers and Employees May Contribute to Medical Savings 
Accounts.--Paragraph (5) of section 220(b) of such Code is amended to 
read as follows:
            ``(5) Coordination with exclusion for employer 
        contributions.--The limitation which would (but for this 
        paragraph) apply under this subsection to the taxpayer for any 
        taxable year shall be reduced (but not below zero) by the 
        amount which would (but for section 106(b)) be includible in 
        the taxpayer's gross income for such taxable year.''.
    (e) Expansion of Permitted Deductibles.--
            (1) In general.--Subparagraph (A) of section 220(c)(2) of 
        such Code (defining high deductible health plan) is amended--
                    (A) in clause (i), by striking ``not less than 
                $1,500 and not more than $2,250'' and inserting ``not 
                less than $1,000 and not more than $5,000'', and
                    (B) in clause (ii), by striking ``not less than 
                $3,000 and not more than $4,500'' and inserting ``not 
                less than $2,000 and not more than $10,000''.
            (2) Conforming amendment.--Subsection (g) of section 220 of 
        such Code is amended--
                    (A) by striking ``1998'' and inserting ``2003''; 
                and
                    (B) by striking ``1997'' and inserting ``2002''.
    (f) Medical Savings Accounts May Be Offered Under Cafeteria 
Plans.--Subsection (f) of section 125 of such Code is amended by 
striking ``106(b),''.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

                TITLE VI--PATIENT ACCESS TO INFORMATION

SEC. 601. PATIENT ACCESS TO INFORMATION REGARDING PLAN COVERAGE, 
              MANAGED CARE PROCEDURES, HEALTH CARE PROVIDERS, AND 
              QUALITY OF MEDICAL CARE.

    (a) In General.--Subpart 2 of part A of title XXVII of the Public 
Health Service Act is amended by adding at the end the following new 
section:

``SEC. 2707. PATIENT ACCESS TO INFORMATION REGARDING PLAN COVERAGE, 
              MANAGED CARE PROCEDURES, HEALTH CARE PROVIDERS, AND 
              QUALITY OF MEDICAL CARE.

    ``(a) Disclosure Requirement.--Each health insurance issuer 
offering health insurance coverage in connection with a group health 
plan shall provide the administrator of such plan on a timely basis 
with the information necessary to enable the administrator to include 
in the summary plan description of the plan required under section 102 
of the Employee Retirement Income Security Act of 1974 (or each summary 
plan description in any case in which different summary plan 
descriptions are appropriate under part 1 of subtitle B of title I of 
such Act for different options of coverage) the information required 
under subsections (b), (c), (d), and (e)(2)(A). To the extent that any 
such issuer provides such information on a timely basis to plan 
participants and beneficiaries, the requirements of this subsection 
shall be deemed satisfied in the case of such plan with respect to such 
information.
    ``(b) Plan Benefits.--The information required under subsection (a) 
includes the following:
            ``(1) Covered items and services.--
                    ``(A) Categorization of included benefits.--A 
                description of covered benefits, categorized by--
                            ``(i) types of items and services 
                        (including any special disease management 
                        program); and
                            ``(ii) types of health care professionals 
                        providing such items and services.
                    ``(B) Emergency medical care.--A description of the 
                extent to which the coverage includes emergency medical 
                care (including the extent to which the coverage 
                provides for access to urgent care centers), and any 
                definitions provided under in connection with such 
                coverage for the relevant coverage terminology 
                referring to such care.
                    ``(C) Preventative services.--A description of the 
                extent to which the coverage includes benefits for 
                preventative services.
                    ``(D) Drug formularies.--A description of the 
                extent to which covered benefits are determined by the 
                use or application of a drug formulary and a summary of 
                the process for determining what is included in such 
                formulary.
                    ``(E) COBRA continuation coverage.--A description 
                of the benefits available under the coverage provided 
                pursuant to part 6 of subtitle B of title I of the 
                Employee Retirement Income Security Act of 1974.
            ``(2) Limitations, exclusions, and restrictions on covered 
        benefits.--
                    ``(A) Categorization of excluded benefits.--A 
                description of benefits specifically excluded from 
                coverage, categorized by types of items and services.
                    ``(B) Utilization review and preauthorization 
                requirements.--Whether coverage for medical care is 
                limited or excluded on the basis of utilization review 
                or preauthorization requirements.
                    ``(C) Lifetime, annual, or other period 
                limitations.--A description of the circumstances under 
                which, and the extent to which, coverage is subject to 
                lifetime, annual, or other period limitations, 
                categorized by types of benefits.
                    ``(D) Custodial care.--A description of the 
                circumstances under which, and the extent to which, the 
                coverage of benefits for custodial care is limited or 
                excluded, and a statement of the definition used in 
                connection with such coverage for custodial care.
                    ``(E) Experimental treatments.--Whether coverage 
                for any medical care is limited or excluded because it 
                constitutes experimental treatment or technology, and 
                any definitions provided in connection with such 
                coverage for the relevant plan terminology referring to 
                such limited or excluded care.
                    ``(F) Medical appropriateness or necessity.--
                Whether coverage for medical care may be limited or 
                excluded by reason of a failure to meet the plan's 
                requirements for medical appropriateness or necessity, 
                and any definitions provided in connection with such 
                coverage for the relevant coverage terminology 
                referring to such limited or excluded care.
                    ``(G) Second or subsequent opinions.--A description 
                of the circumstances under which, and the extent to 
                which, coverage for second or subsequent opinions is 
                limited or excluded.
                    ``(H) Specialty care.--A description of the 
                circumstances under which, and the extent to which, 
                coverage of benefits for specialty care is conditioned 
                on referral from a primary care provider.
                    ``(I) Continuity of care.--A description of the 
                circumstances under which, and the extent to which, 
                coverage of items and services provided by any health 
                care professional is limited or excluded by reason of 
                the departure by the professional from any defined set 
                of providers.
                    ``(J) Restrictions on coverage of emergency 
                services.--A description of the circumstances under 
                which, and the extent to which, the coverage, in 
                including emergency medical care furnished to a 
                participant or beneficiary of the plan imposes any 
                financial responsibility described in subsection (c) on 
                participants or beneficiaries or limits or conditions 
                benefits for such care subject to any other term or 
                condition of such coverage.
    ``(c) Participant's Financial Responsibilities.--The information 
required under subsection (a) includes an explanation of--
            ``(1) a participant's financial responsibility for payment 
        of premiums, coinsurance, copayments, deductibles, and any 
        other charges; and
            ``(2) the circumstances under which, and the extent to 
        which, the participant's financial responsibility described in 
        paragraph (1) may vary, including any distinctions based on 
        whether a health care provider from whom covered benefits are 
        obtained is included in a defined set of providers.
    ``(d) Accountability.--The information required under subsection 
(a) includes a description of the legal recourse options available for 
participants and beneficiaries under the plan including--
            ``(1) the preemption that applies under section 514 of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1144) to certain actions arising out of the provision of health 
        benefits;
            ``(2) the ability of a participant or beneficiary (or the 
        estate of the participant or beneficiary) under State law to 
        recover damages resulting from personal injury or for wrongful 
        death against any person in connection with the provision of 
        insurance, administrative services, or medical services by such 
        person to or for a group health plan; and
            ``(3) the extent to which coverage decisions made by the 
        plan are subject to internal review or any external review and 
        the proper time frames under which such reviews may be 
        requested and conducted.
    ``(e) Information Available on Request.--
            ``(1) Access to plan benefit information in electronic 
        form.--
                    ``(A) In general.--A group health plan (and a 
                health insurance issuer offering health insurance 
                coverage in connection with a group health plan) shall, 
                upon written request (made not more frequently than 
                annually), make available to participants and 
                beneficiaries, in a generally recognized electronic 
                format, the following information:
                            ``(i) the latest summary plan description, 
                        including the latest summary of material 
                        modifications; and
                            ``(ii) the actual plan provisions setting 
                        forth the benefits available under the plan,
                to the extent such information relates to the coverage 
                options under the plan available to the participant or 
                beneficiary. A reasonable charge may be made to cover 
                the cost of providing such information in such 
                generally recognized electronic format. The Secretary 
                may by regulation prescribe a maximum amount which will 
                constitute a reasonable charge under the preceding 
                sentence.
                    ``(B) Alternative access.--The requirements of this 
                paragraph may be met by making such information 
                generally available (rather than upon request) on the 
                Internet or on a proprietary computer network in a 
                format which is readily accessible to participants and 
                beneficiaries.
            ``(2) Additional information to be provided on request.--
                    ``(A) Inclusion in summary plan description of 
                summary of additional information.--The information 
                required under subsection (a) includes a summary 
                description of the types of information required by 
                this subsection to be made available to participants 
                and beneficiaries on request.
                    ``(B) Information required from plans and issuers 
                on request.--In addition to information required to be 
                included in summary plan descriptions under this 
                subsection, a group health plan (and a health insurance 
                issuer offering health insurance coverage in connection 
                with a group health plan) shall provide the following 
                information to a participant or beneficiary on request:
                            ``(i) Network characteristics.--If the plan 
                        (or issuer) utilizes a defined set of providers 
                        under contract with the plan (or issuer), a 
                        detailed list of the names of such providers 
                        and their geographic location, set forth 
                        separately with respect to primary care 
                        providers and with respect to specialists.
                            ``(ii) Care management information.--A 
                        description of the circumstances under which, 
                        and the extent to which, the plan has special 
                        disease management programs or programs for 
                        persons with disabilities, indicating whether 
                        these programs are voluntary or mandatory and 
                        whether a significant benefit differential 
                        results from participation in such programs.
                            ``(iii) Inclusion of drugs and biologicals 
                        in formularies.--A statement of whether a 
                        specific drug or biological is included in a 
                        formulary used to determine benefits under the 
                        plan and a description of the procedures for 
                        considering requests for any patient-specific 
                        waivers.
                            ``(iv) Procedures for determining 
                        exclusions based on medical necessity or 
                        experimental treatments.--Upon receipt by the 
                        participant or beneficiary of any notification 
                        of an adverse coverage decision based on a 
                        determination relating to medical necessity or 
                        an experimental treatment or technology, a 
                        description of the procedures and medically-
                        based criteria used in such decision.
                            ``(v) Preauthorization and utilization 
                        review procedures.--Upon receipt by the 
                        participant or beneficiary of any notification 
                        of an adverse coverage decision, a description 
                        of the basis on which any preauthorization 
                        requirement or any utilization review 
                        requirement has resulted in such decision.
                            ``(vi) Accreditation status of health 
                        insurance issuers and service providers.--A 
                        description of the accreditation and licensing 
                        status (if any) of each health insurance issuer 
                        offering health insurance coverage in 
                        connection with the plan and of any utilization 
                        review organization utilized by the issuer or 
                        the plan, together with the name and address of 
                        the accrediting or licensing authority.
                            ``(vii) Measures of enrollee 
                        satisfaction.--The latest information (if any) 
                        maintained by the plan, or by any health 
                        insurance issuer offering health insurance 
                        coverage in connection with the plan, relating 
                        to enrollee satisfaction.
                            ``(viii) Quality performance measures.--The 
                        latest information (if any) maintained by the 
                        plan, or by any health insurance issuer 
                        offering health insurance coverage in 
                        connection with the plan, relating to quality 
                        of performance of the delivery of medical care 
                        with respect to coverage options offered under 
                        the plan and of health care professionals and 
                        facilities providing medical care under the 
                        plan.
                    ``(C) Information required from health care 
                professionals on request.--Any health care professional 
                treating a participant or beneficiary under a group 
                health plan shall provide to the participant or 
                beneficiary, on request, a description of his or her 
                professional qualifications (including board 
                certification status, licensing status, and 
                accreditation status, if any), privileges, and 
                experience and a general description by category 
                (including salary, fee-for-service, capitation, and 
                such other categories as may be specified in 
                regulations of the Secretary) of the applicable method 
                by which such professional is compensated in connection 
                with the provision of such medical care.
                    ``(D) Information required from health care 
                facilities on request.--Any health care facility from 
                which a participant or beneficiary has sought treatment 
                under a group health plan shall provide to the 
                participant or beneficiary, on request, a description 
                of the facility's corporate form or other 
                organizational form and all forms of licensing and 
                accreditation status (if any) assigned to the facility 
                by standard-setting organizations.
    ``(f) Access to Information Relevant to the Coverage Options Under 
Which the Participant or Beneficiary Is Eligible To Enroll.--In 
addition to information otherwise required to be made available under 
this section, a group health plan (and a health insurance issuer 
offering health insurance coverage in connection with a group health 
plan) shall, upon written request (made not more frequently than 
annually), make available to a participant (and an employee who, under 
the terms of the plan, is eligible for coverage but not enrolled) in 
connection with a period of enrollment the summary plan description for 
any coverage option under the plan under which the participant is 
eligible to enroll and any information described in clauses (i), (ii), 
(iii), (vi), (vii), and (viii) of subsection (e)(2)(B).
    ``(g) Advance Notice of Changes in Drug Formularies.--Not later 
than 30 days before the effective date of any exclusion of a specific 
drug or biological from any drug formulary under the plan that is used 
in the treatment of a chronic illness or disease, the plan shall take 
such actions as are necessary to reasonably ensure that plan 
participants are informed of such exclusion. The requirements of this 
subsection may be satisfied--
            ``(1) by inclusion of information in publications broadly 
        distributed by plan sponsors, employers, or employee 
        organizations;
            ``(2) by electronic means of communication (including the 
        Internet or proprietary computer networks in a format which is 
        readily accessible to participants);
            ``(3) by timely informing participants who, under an 
        ongoing program maintained under the plan, have submitted their 
        names for such notification; or
            ``(4) by any other reasonable means of timely informing 
        plan participants.''.

SEC. 602. EFFECTIVE DATE.

    (a) In General.--The amendments made by section 601 shall apply 
with respect to plan years beginning on or after January 1 of the 
second calendar year following the date of the enactment of this Act. 
The Secretary shall first issue all regulations necessary to carry out 
the amendments made by section 601 before such date.
    (b) Limitation on Enforcement Actions.--No enforcement action shall 
be taken, pursuant to the amendments made by section 601, against a 
group health plan or health insurance issuer with respect to a 
violation of a requirement imposed by such amendments before the date 
of issuance of final regulations issued in connection with such 
requirement, if the plan or issuer has sought to comply in good faith 
with such requirement.
                                 <all>
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