I 

111TH CONGRESS 

1ST SESSION H. R. 2360 

To amend the Public Health Service Act to establish a nationwide health 

insurance purchasing pool for small businesses and the self-employed 

that would offer a choice of private health plans and make health coverage more affordable, predictable, and accessible. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 12, 2009 

Mr. KIND (for himself, Mr. GERLACH, Mr. BARROW, Mr. YOUNG of Florida, 

Mr. ADLER of New Jersey, Mrs. EMERSON, Ms. KOSMAS, Mr. BARTLETT, 

Mrs. HALVORSON, Mr. SCHOCK, Mr. ALTMIRE, Ms. GINNY BROWNWAITE of Florida, Mr. PETERS, Ms. GRANGER, Mr. MCMAHON, Mr. 

DENT, Ms. BEAN, Mr. JOHNSON of Illinois, Ms. SCHWARTZ, Mr. 

COURTNEY, and Mr. CARNAHAN) introduced the following bill; which was 

referred to the Committee on Energy and Commerce, and in addition to 

the Committees on Education and Labor, Ways and Means, and Rules, 

for a period to be subsequently determined by the Speaker, in each case 

for consideration of such provisions as fall within the jurisdiction of the 

committee concerned 

A BILL 

To amend the Public Health Service Act to establish a nationwide health insurance purchasing pool for small businesses and the self-employed that would offer a choice 

of private health plans and make health coverage more 

affordable, predictable, and accessible. 

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

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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Small Business Health 

3 Options Program Act of 2009’’ or the ‘‘SHOP Act’’. 

4 SEC. 2. AMENDMENT TO THE PUBLIC HEALTH SERVICE 

5 ACT. 

6 The Public Health Service Act (42 U.S.C. 201 et 

7 seq.) is amended by adding at the end the following: 

8 ‘‘TITLE XXXI—SMALL BUSINESS 

9 HEALTH OPTIONS PROGRAM 

10 ‘‘SEC. 3101. DEFINITIONS. 

11 ‘‘(a) IN GENERAL.—In this title: 

12 ‘‘(1) ADMINISTRATOR.—The term ‘Adminis13 trator’ means the Administrator appointed under 

14 section 3102(a). 

15 ‘‘(2) SMALL BUSINESS HEALTH BOARD.—The 

16 term ‘Small Business Health Board’ means the 

17 Board established under section 3102(d). 

18 ‘‘(3) EMPLOYEE.—The term ‘employee’ has the 

19 meaning given such term under section 3(6) of the 

20 Employee Retirement Income Security Act of 1974 

21 (29 U.S.C. 1002(6)). Such term shall not include an 

22 employee of the Federal Government. 

23 ‘‘(4) EMPLOYER.—The term ‘employer’ has the 

24 meaning given such term under section 3(5) of the 

25 Employee Retirement Income Security Act of 1974 

26 (29 U.S.C. 1002(5)), except that such term shall inmstockstill on PROD1PC66 with BILLS

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1 clude employers who employed an average of at least 

2 1 but not more than 100 employees (who worked an 

3 average of at least 35 hours per week) on business 

4 days during the year preceding the date of applica5 tion, and shall include self-employed individuals with 

6 either not less than $5,000 in net earnings or not 

7 less than $15,000 in gross earnings from self-em8 ployment in the preceding taxable year. Such term 

9 shall not include the Federal Government. 

10 ‘‘(5) HEALTH INSURANCE COVERAGE.—The 

11 term ‘health insurance coverage’ has the meaning 

12 given such term in section 2791. 

13 ‘‘(6) HEALTH INSURANCE ISSUER.—The term 

14 ‘health insurance issuer’ has the meaning given such 

15 term in section 2791. 

16 ‘‘(7) HEALTH STATUS-RELATED FACTOR.—The 

17 term ‘health status-related factor’ has the meaning 

18 given such term in section 2791(d)(9). 

19 ‘‘(8) PARTICIPATING EMPLOYER.—The term 

20 ‘participating employer’ means an employer that— 

21 ‘‘(A) elects to provide health insurance cov22 erage under this title to its employees; and 

23 ‘‘(B) is not offering other comprehensive 

24 health insurance coverage to such employees. 

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1 ‘‘(b) APPLICATION OF CERTAIN RULES IN DETER2 MINATION OF EMPLOYER SIZE.—For purposes of sub3 section (a)(3): 

4 ‘‘(1) APPLICATION OF AGGREGATION RULE FOR

5 EMPLOYERS.—All persons treated as a single em6 ployer under subsection (b), (c), (m), or (o) of sec7 tion 414 of the Internal Revenue Code of 1986 shall 

8 be treated as 1 employer. 

9 ‘‘(2) EMPLOYERS NOT IN EXISTENCE IN PRE10 CEDING YEAR.—In the case of an employer which 

11 was not in existence for the full year prior to the 

12 date on which the employer applies to participate, 

13 the determination of whether such employer meets 

14 the requirements of subsection (a)(4) shall be based 

15 on the average number of employees that it is rea16 sonably expected such employer will employ on busi17 ness days in the employer’s first full year. 

18 ‘‘(3) PREDECESSORS.—Any reference in this 

19 subsection to an employer shall include a reference 

20 to any predecessor of such employer. 

21 ‘‘(c) WAIVER AND CONTINUATION OF PARTICIPA22 TION.— 

23 ‘‘(1) WAIVER.—The Administrator may waive 

24 the limitations relating to the size of an employer 

25 which may participate in the health insurance promstockstill on PROD1PC66 with BILLS

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1 gram established under this title on a case by case 

2 basis if the Administrator determines that such em3 ployer makes a compelling case for such a waiver. In 

4 making determinations under this paragraph, the 

5 Administrator may consider the effects of the em6 ployment of temporary and seasonal workers and 

7 other factors. 

8 ‘‘(2) CONTINUATION OF PARTICIPATION.—An 

9 employer participating in the program under this 

10 title that experiences an increase in the number of 

11 employees so that such employer has in excess of 

12 100 employees, may not be excluded from participa13 tion solely as a result of such increase in employees. 

14 ‘‘(d) TREATMENT OF HEALTH INSURANCE COV15 ERAGE AS GROUP HEALTH PLAN.—Health insurance cov16 erage offered under this title shall be treated as a group 

17 health plan for purposes of applying the Employee Retire18 ment Income Security Act of 1974 (29 U.S.C. 1001 et 

19 seq.) except to the extent that a provision of this title ex20 pressly provides otherwise. 

21 ‘‘(e) APPLICATION OF HIPAA RULES.—Subject to 

22 the provisions of this title, parts A and C of title XXVII 

23 shall apply to health insurance coverage offered under this 

24 title by health insurance issuers. Subject to section 2723, 

25 a State may modify State law as appropriate to provide 

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1 for the enforcement of such provisions for health insur2 ance coverage offered in the State under this title. Part 

3 7 of subtitle B of title I of the Employee Retirement In4 come Security Act of 1974 (29 U.S.C. 1181 et seq.) shall 

5 continue to apply to group health plans offering coverage 

6 under this title. Subtitle K of the Internal Revenue Code 

7 of 1986 shall continue to apply to covered employers and 

8 group health plans offering coverage under this title. 

9 ‘‘SEC. 3102. ADMINISTRATION OF SMALL BUSINESS HEALTH 

10 INSURANCE POOL. 

11 ‘‘(a) OFFICE AND ADMINISTRATOR.—The Secretary 

12 shall designate an office within the Department of Health 

13 and Human Services to administer the program under this 

14 title. Such office shall be headed by an Administrator to 

15 be appointed by the Secretary. 

16 ‘‘(b) QUALIFICATIONS.—The Secretary shall ensure 

17 that the individual appointed to serve as the Administrator 

18 under subsection (a) has an appropriate background with 

19 experience in health insurance, healthcare management, or 

20 health policy. 

21 ‘‘(c) DUTIES.—The Administrator shall— 

22 ‘‘(1) enter into contracts with health insurance 

23 issuers to provide health insurance coverage to indi24 viduals and employees who enroll in health insurance 

25 coverage in accordance with this title; 

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1 ‘‘(2) maintain the contracts for health insur2 ance policies when an employee elects which health 

3 plan offered under this title to enroll in as permitted 

4 under section 3107(d)(7); 

5 ‘‘(3) ensure that health insurance issuers com6 ply with the requirements of this title; 

7 ‘‘(4) ensure that employers meet eligibility re8 quirements for participation in the health insurance 

9 pool established under this title; 

10 ‘‘(5) enter into agreements with entities to 

11 serve as navigators, as defined in section 3103; 

12 ‘‘(6) collect premiums from employers and em13 ployees and make payments for health insurance 

14 coverage; 

15 ‘‘(7) collect other information needed to admin16 ister the program under this title; 

17 ‘‘(8) compile, produce, and distribute informa18 tion (which shall not be subject to review or modi19 fication by the States) to employers and employees 

20 (directly and through navigators) concerning the 

21 open enrollment process, the health insurance cov22 erage available through the pool, and standardized 

23 comparative information concerning such coverage, 

24 which shall be available through an interactive Inter25 net website, including a description of the coverage 

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1 plans available in each State and comparative infor2 mation, about premiums, index rates, benefits, qual3 ity, and consumer satisfaction under such plans; 

4 ‘‘(9) provide information to health insurance 

5 issuers, including, at the discretion of the Adminis6 trator, notification when proposed rates are not in a 

7 competitive range; 

8 ‘‘(10) conduct public education activities (di9 rectly and through navigators) to raise the aware10 ness of the public of the program under this title 

11 and the associated tax credit under the Internal 

12 Revenue Code of 1986; 

13 ‘‘(11) develop methods to facilitate enrollment 

14 in health insurance coverage under this title, includ15 ing through the use of the Internet; 

16 ‘‘(12) if appropriate, enter into contracts for 

17 the performance of administrative functions under 

18 this title as permitted under section 3109; 

19 ‘‘(13) carefully consider benefit recommenda20 tions that are endorsed by at least two-thirds of the 

21 members of the Small Business Health Board; 

22 ‘‘(14) establish and administer a contingency 

23 fund for risk corridors as provided for in section 

24 3108; 

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1 ‘‘(15) coordinate with State insurance regu2 lators to ensure timely and effective consideration of 

3 complaints, grievances, and appeals; and 

4 ‘‘(16) carry out any other activities necessary to 

5 administer this title. 

6 ‘‘(d) LIMITATIONS.—The Administrator shall not— 

7 ‘‘(1) negotiate premiums with participating 

8 health insurance issuers; or 

9 ‘‘(2) exclude health insurance issuers from par10 ticipating in the program under this title except for 

11 violating contracts or the requirements of this title. 

12 ‘‘(e) SMALL BUSINESS HEALTH BOARD.— 

13 ‘‘(1) IN GENERAL.—There shall be established 

14 a Small Business Health Board to monitor the im15 plementation of the program under this title and to 

16 make recommendations to the Administrator con17 cerning improvements in the program. 

18 ‘‘(2) APPOINTMENT.—The Comptroller General 

19 shall appoint 13 individuals who have expertise in 

20 healthcare benefits, financing, economics, actuarial 

21 science, or other related fields, to serve as members 

22 of the Small Business Health Board. In appointing 

23 members under the preceding sentence, the Comp24 troller General shall ensure that such members in25 clude— 

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1 ‘‘(A) a mix of different types of profes2 sionals; 

3 ‘‘(B) a broad geographic representation; 

4 ‘‘(C) not less than 3 individuals with an 

5 employee perspective; 

6 ‘‘(D) not less than 3 individuals with a 

7 small business perspective, at least 1 of whom 

8 shall have a self-employed perspective; 

9 ‘‘(E) not less than 1 individual with a 

10 background in insurance regulation; and 

11 ‘‘(F) not less than 1 individual with a pa12 tient perspective. 

13 ‘‘(3) TERMS.—Members of the Small Business 

14 Health Board shall serve for a term of 3 years, such 

15 terms to end on March 15 of the applicable year, ex16 cept as provided in paragraph (4). The Comptroller 

17 General shall stagger the terms for members first 

18 appointed. A member may be reappointed after the 

19 expiration of a term. A member may serve after ex20 piration of a term until a successor has been ap21 pointed. 

22 ‘‘(4) SMALL BUSINESS REPRESENTATIVES.— 

23 Beginning on March 16, 2013, 3 of the individuals 

24 the Comptroller General appoints to the Small Busi25 ness Health Board shall be representatives of the 3 

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1 navigators through which the largest number of indi2 viduals have enrolled for health insurance coverage 

3 over the previous 2-year period. Such appointees 

4 shall serve for 1 year. The Comptroller General shall 

5 consider for appointment in years prior to the date 

6 specified in this paragraph, individuals who are rep7 resentatives of entities that may serve as navigators. 

8 ‘‘(5) CHAIRPERSON; VICE CHAIRPERSON.—The 

9 Comptroller General shall designate a member of the 

10 Small Business Health Board, at the time of ap11 pointment of such member, to serve as Chairperson 

12 and a member to serve as Vice Chairperson for the 

13 term of the appointment, except that in the case of 

14 a vacancy of either such position, the Comptroller 

15 General may designate another member to serve in 

16 such position for the remainder of such member’s 

17 term. 

18 ‘‘(6) COMPENSATION.—While serving on the 

19 business of the Small Business Health Board (in20 cluding travel time), a member of the Small Busi21 ness Health Board shall be entitled to compensation 

22 at the per diem equivalent of the rate provided for 

23 level IV of the Executive Schedule under section 

24 5315 of title 5, United States Code, and while so 

25 serving away from home and the member’s regular 

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1 place of business, a member may be allowed travel 

2 expenses, as authorized by the Chairperson of the 

3 Small Business Health Board. 

4 ‘‘(7) DISCLOSURE.—The Comptroller General 

5 shall establish a system for the public disclosure, by 

6 members of the Small Business Health Board, of fi7 nancial and other potential conflicts of interest. 

8 ‘‘(8) MEETINGS.—The Small Business Health 

9 Board shall meet at the call of the Chairperson. 

10 Each such meeting shall be open to the public. 

11 ‘‘(9) DUTIES.—The Small Business Health 

12 Board shall— 

13 ‘‘(A) provide general oversight of the pro14 gram under this title and make recommenda15 tions to the Administrator; 

16 ‘‘(B) monitor, review, seek public input on, 

17 and make recommendations to the Adminis18 trator on the benefit requirements for nation19 wide plans in this title; 

20 ‘‘(C) make recommendations concerning 

21 information that the Administrator, health 

22 plans, and navigators should distribute to em23 ployers and employees participating in the pro24 gram under this title; and 

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1 ‘‘(D) monitor and make recommendations 

2 to the Administrator on adverse selection within 

3 the program under this title and between the 

4 coverage provided under the program and the 

5 State-regulated health insurance market. 

6 ‘‘(10) APPROVAL OF RECOMMENDATIONS.—A 

7 recommendation shall require approval by not less 

8 than two-thirds of the members of the Board. 

9 ‘‘(11) PUBLIC NOTICE AND COMMENT ON REC10 OMMENDATIONS.—The Administrator shall— 

11 ‘‘(A) publish recommendations by the 

12 Small Business Health Board in the Federal 

13 Register; 

14 ‘‘(B) solicit written comments concerning 

15 such recommendations; and 

16 ‘‘(C) provide an opportunity for the pres17 entation of oral comments concerning such rec18 ommendations at a public meeting. 

19 ‘‘SEC. 3103. NAVIGATORS. 

20 ‘‘(a) IN GENERAL.—The Administrator shall enter 

21 into agreements with private and public entities, beginning 

22 a reasonable period prior to the beginning of the first cal23 endar year in which health insurance coverage is offered 

24 under this title, under which such entities will serve as 

25 navigators. 

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1 ‘‘(b) ELIGIBILITY.—To be eligible to enter into an 

2 agreement under subsection (a), an entity shall dem3 onstrate to the Administrator that the entity has existing 

4 relationships with, or could readily establish relationships 

5 with, employers or employees and self-employed individ6 uals, likely to be eligible to participate in the program 

7 under this title. Such entities may include trade, industry 

8 and professional associations, chambers of commerce, 

9 unions, small business development centers, and other en10 tities that the Administrator determines to be capable of 

11 carrying out the duties described in subsection (c). 

12 ‘‘(c) DUTIES.—An entity that serves as a navigator 

13 under an agreement under subsection (a) shall— 

14 ‘‘(1) coordinate with the Administrator on pub15 lic education activities to raise awareness of the pro16 gram under this title; 

17 ‘‘(2) distribute information developed by the 

18 Administrator on the open enrollment process, pri19 vate health plans available through the program 

20 under this title, and standardized comparative infor21 mation about the health insurance coverage under 

22 the program; 

23 ‘‘(3) distribute information about the avail24 ability of the tax credit under section 36 of the Inmstockstill on PROD1PC66 with BILLS

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1 ternal Revenue Code of 1986 as added by the Small 

2 Business Health Options Program Act of 2009; 

3 ‘‘(4) provide referrals to the applicable State 

4 agency or agencies for any enrollee with a grievance, 

5 complaint, or question regarding their health insur6 ance issuer, their coverage or plan, or a determina7 tion under such coverage or plan; 

8 ‘‘(5) assist employers and employees in enroll9 ing in the program under this title; and 

10 ‘‘(6) respond to questions about the program 

11 under this title and participating plans. 

12 ‘‘(d) SUPPLEMENTAL MATERIALS.—In addition to 

13 information developed by the Administrator under sub14 section (c)(2), a navigator may develop and distribute 

15 other information that is related to the health insurance 

16 program established under this title, subject to review and 

17 approval by the Administrator and filing in each State in 

18 which the navigator operates. 

19 ‘‘(e) STANDARDS.— 

20 ‘‘(1) IN GENERAL.—The Administrator shall es21 tablish standards for navigators under this section, 

22 including provisions to avoid conflicts of interest. 

23 Under such standards, a navigator may not— 

24 ‘‘(A) be a health insurance issuer; or 

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1 ‘‘(B) receive any consideration directly or 

2 indirectly from any health insurance issuer in 

3 connection with the participation of any em4 ployer in the program under this title or the en5 rollment of any eligible employee in health in6 surance coverage under this title. 

7 ‘‘(2) FAIR AND IMPARTIAL INFORMATION AND

8 SERVICES.—The Administrator shall consult with 

9 the Small Business Health Board concerning the 

10 standards necessary to ensure that a navigator will 

11 provide fair and impartial information and services. 

12 An agreement between the Administrator and a nav13 igator may include specific provisions with respect to 

14 such navigator to ensure that such navigator will 

15 provide fair and impartial information and services. 

16 If a navigator, or entity seeking to become a navi17 gator, is a party to any arrangement with any health 

18 insurance issuer to receive compensation related to 

19 other healthcare programs not covered under this 

20 title, the entity shall disclose the terms of such com21 pensation arrangements to the Administrator, and 

22 the Administrator shall take such information into 

23 account in determining the appropriate standards 

24 and agreement terms for such navigator. 

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1 ‘‘SEC. 3104. CONTRACTS WITH HEALTH INSURANCE 

2 ISSUERS. 

3 ‘‘(a) IN GENERAL.—The Administrator may enter 

4 into contracts with qualified health insurance issuers, 

5 without regard to section 5 of title 41, United States Code, 

6 or other statutes requiring competitive bidding, to provide 

7 health benefits plans to employees of participating employ8 ers and self-employed individuals under this title. Each 

9 contract shall be for a uniform term of at least 1 year, 

10 but may be made automatically renewable from term to 

11 term in the absence of notice of termination by either 

12 party. In entering into such contracts, the Administrator 

13 shall ensure that health benefits coverage is provided for 

14 an individual only, 2 adults in a household, 1 adult and 

15 1 or more children, and a family. 

16 ‘‘(b) ELIGIBILITY.—A health insurance issuer shall 

17 be eligible to enter into a contract under subsection (a) 

18 if such issuer— 

19 ‘‘(1) is licensed to offer health benefits plan 

20 coverage in each State in which the plan is offered; 

21 and 

22 ‘‘(2) meets such other reasonable requirements 

23 as determined appropriate by the Administrator, 

24 after an opportunity for public comment and publi25 cation in the Federal Register. 

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1 ‘‘(c) COST-SHARING AND NETWORKS.—The Adminis2 trator shall ensure that health benefits plans with a range 

3 of cost-sharing and network arrangements are available 

4 under this title. 

5 ‘‘(d) REVOCATION.—Approval of a health benefits 

6 plan participating in the program under this title may be 

7 withdrawn or revoked by the Administrator only after no8 tice to the health insurance issuer involved and an oppor9 tunity for a hearing without regard to subchapter II of 

10 chapter 5 and chapter 7 of title 5, United States Code. 

11 ‘‘(e) CONVERSION.— 

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graph (2), a contract may not be made or a plan ap14 proved under this section if the health insurance 

15 issuer under such contract or plan does not provide 

16 to each enrollee whose coverage under the plan is 

17 terminated, including a termination due to dis18 continuance of the contract or plan, the option to 

19 have issued to that individual a nongroup policy 

20 without evidence of insurability. A health insurance 

21 issuer shall provide a notice of such option to indi22 viduals who enroll in the plan. An enrollee who exer23 cises such conversion option shall pay the full peri24 odic charges for the nongroup policy. 

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1 ‘‘(2) EXCEPTIONS.—A health insurance issuer 

2 shall not be required to offer a nongroup policy 

3 under paragraph (1) if the termination under the 

4 plan occurred because— 

5 ‘‘(A) the enrollee failed to pay any required 

6 monthly premiums under the plan; 

7 ‘‘(B) the enrollee performed an act or 

8 practice that constitutes fraud in connection 

9 with the coverage under the plan; 

10 ‘‘(C) the enrollee made an intentional mis11 representation of a material fact under the 

12 terms of coverage of the plan; or 

13 ‘‘(D) the terminated coverage under the 

14 plan was replaced by similar coverage within 31 

15 days after the effective date of such termi16 nation. 

17 ‘‘(f) PAYMENT OF PREMIUMS.— 

18 ‘‘(1) IN GENERAL.—Employers shall collect pre19 mium payments from their employees through pay20 roll deductions or other payments from employees 

21 and shall forward such payments and the contribu22 tion of the employer (if any) to the Administrator. 

23 The Administrator shall develop procedures through 

24 which such payments shall be received and for25 warded to the health insurance issuer involved. 

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1 ‘‘(2) FAILURE TO PAY.—The Administrator 

2 shall establish— 

3 ‘‘(A) procedures for the termination of em4 ployers that fail for a consecutive 2-month pe5 riod (or such other time period as determined 

6 appropriate by the Administrator) to make pre7 mium payments in a timely manner; and 

8 ‘‘(B) other procedures regarding unpaid 

9 and uncollected premiums. 

10 ‘‘SEC. 3105. EMPLOYER PARTICIPATION. 

11 ‘‘(a) PARTICIPATION PROCEDURE.—The Adminis12 trator shall develop a procedure for employers and self13 employed individuals to participate in the program under 

14 this title, including procedures relating to the offering of 

15 health benefits plans to employees and the payment of pre16 miums for health insurance coverage under this title. For 

17 the purpose of premium payments, a self-employed indi18 vidual shall be considered an employer that is making a 

19 100 percent contribution toward the premium amount. 

20 ‘‘(b) ENROLLMENT AND OFFERING OF OTHER COV21 ERAGE.— 

22 ‘‘(1) ENROLLMENT.—A participating employer 

23 shall ensure that each eligible employee has an op24 portunity to enroll in a plan of the employer’s choice 

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1 or a plan of the employee’s choice in accordance with 

2 section 3107(d)(7). 

3 ‘‘(2) PROHIBITION ON OFFERING OTHER COM4 PREHENSIVE HEALTH BENEFIT COVERAGE.—A par5 ticipating employer may not offer a health insurance 

6 plan providing comprehensive health benefit coverage 

7 to employees other than a health benefits plan of8 fered under this title. 

9 ‘‘(3) PROHIBITION ON COERCION.—An em10 ployer shall not pressure, coerce, or offer induce11 ments to an employee to elect not to enroll in cov12 erage under the program under this title or to select 

13 a particular health benefits plan. 

14 ‘‘(4) OFFER OF SUPPLEMENTAL COVERAGE OP15 TIONS.— 

16 ‘‘(A) IN GENERAL.—A participating em17 ployer may offer supplementary coverage op18 tions to employees. 

19 ‘‘(B) DEFINITION.—In subparagraph (A), 

20 the term ‘supplementary coverage’ means bene21 fits described as ‘excepted benefits’ under sec22 tion 2791(c). 

23 ‘‘(c) REGULATORY FLEXIBILITY.—In developing the 

24 procedure under subsection (a), the Administrator shall 

25 comply with the requirements specified under the Regumstockstill on PROD1PC66 with BILLS

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1 latory Flexibility Act under chapter 6 of title 5, United 

2 States Code, consider the economic impacts that the regu3 lation will have on small businesses, and consider regu4 latory alternatives that would mitigate such impact. The 

5 Administrator shall publish and publicly disseminate a 

6 small business compliance guide, pursuant to section 212 

7 of the Small Business Regulatory Enforcement Fairness 

8 Act, that explains the compliance requirements for em9 ployer participation. Such compliance guide shall be pub10 lished not later than the date of the publication of the 

11 final rule under this title, or the effective date of such 

12 rules, whichever is later. 

13 ‘‘(d) RULE OF CONSTRUCTION.—Except as provided 

14 in section 3104(f), nothing in this title shall be construed 

15 to require that an employer make premium contributions 

16 on behalf of employees. 

17 ‘‘SEC. 3106. ELIGIBILITY AND ENROLLMENT. 

18 ‘‘(a) IN GENERAL.—An individual shall be eligible to 

19 enroll in health insurance coverage under this title for cov20 erage beginning in 2012 if such individual is an employee 

21 of a participating employer described in section 

22 3101(a)(4) or is a self-employed individual as defined in 

23 section 401(c)(1)(B) of the Internal Revenue Code of 

24 1986 and meets the definition of a participating employer 

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1 in section 3101(a)(8). An employer may allow employees 

2 who average fewer than 35 hours per week to enroll. 

3 ‘‘(b) LIMITATION.—A health insurance issuer may 

4 not refuse to provide coverage to any eligible individual 

5 under subsection (a) who selects a health benefits plan of6 fered by such issuer under this title. 

7 ‘‘(c) TYPE OF ENROLLMENT.—An eligible individual 

8 may enroll as an individual or as an adult with 1 or more 

9 children regardless of whether another adult is present in 

10 the enrollee’s household or family. 

11 ‘‘(d) OPEN ENROLLMENT.— 

12 ‘‘(1) IN GENERAL.—The Administrator shall es13 tablish an annual open enrollment period during 

14 which an employer may elect to become a partici15 pating employer and an employee may enroll in a 

16 health benefits plan under this title for the following 

17 calendar year. 

18 ‘‘(2) OPEN ENROLLMENT PERIOD.—For pur19 poses of this title, the term ‘open enrollment period’ 

20 means, with respect to calendar year 2012 and each 

21 succeeding calendar year, the period beginning on 

22 October 1, 2011, and ending December 1, 2011, and 

23 each succeeding period beginning October 1 and 

24 ending December 1. Coverage in a health benefits 

25 plan selected during such an open enrollment period 

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1 shall begin on January 1 of the calendar year fol2 lowing the selection. 

3 ‘‘(3) NEWLY ELIGIBLE EMPLOYERS AND EM4 PLOYEES.—Notwithstanding the open enrollment pe5 riod provided for under paragraph (2), the Adminis6 trator shall establish an enrollment process to enable 

7 a newly eligible employer or an employer with an ex8 isting health benefits plan whose term is ending to 

9 become a participating employer and for an em10 ployee of such employer, or a new employee of a par11 ticipating employer, to enroll in a health benefits 

12 plan under this title outside of an open enrollment 

13 period subject to 2701(f). The Administrator may 

14 establish a process for setting the renewal date for 

15 the participation of an employer that initially be16 comes a participating employer outside of the open 

17 enrollment period to coincide with a subsequent open 

18 enrollment period. 

19 ‘‘(4) LIMITATION OF CHANGING ENROLL20 MENT.—An employer or employee (as the case may 

21 be) may elect to change the health benefits plan that 

22 the employee is enrolled in only during an open en23 rollment period. 

24 ‘‘(5) EFFECTIVENESS OF ELECTION AND

25 CHANGE OF ELECTION.—An election to change a 

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1 health benefits plan that is made during the open 

2 enrollment period under paragraph (2) shall take ef3 fect as of the first day of the following calendar 

4 year. 

5 ‘‘(6) CONTINUATION OF ENROLLMENT.—An 

6 employee who has enrolled in a health benefits plan 

7 under this title is considered to have been continu8 ously enrolled in that health benefits plan until such 

9 time as— 

10 ‘‘(A) the employer or employee (as the case 

11 may be) elects to change health benefits plans; 

12 or 

13 ‘‘(B) the health benefits plan is termi14 nated. 

15 ‘‘(e) PROVIDING INFORMATION TO PROMOTE IN16 FORMED CHOICE.—The Administrator shall compile, 

17 produce, and disseminate information to employers, em18 ployees, and navigators under section 3102(c)(8) to pro19 mote informed choice that shall be made available at least 

20 30 days prior to the beginning of each open enrollment 

21 period. 

22 ‘‘(f) TERMINATION OF EMPLOYMENT.— 

23 ‘‘(1) IN GENERAL.—With respect to an em24 ployee who is enrolled in a health plan through the 

25 program under this title and who is terminated or 

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1 separated from employment, such employee may re2 main enrolled in such health plan for the period de3 scribed in paragraph (2) if the employee pays 102 

4 percent of the monthly premium for such plan for 

5 such period as provided for under paragraph (3). 

6 ‘‘(2) PERIOD DESCRIBED.—The period de7 scribed in this paragraph is the longer of— 

8 ‘‘(A) the period provided for in the 

9 COBRA continuation provisions (as such term 

10 is defined in section 3001(a)(10)(B) of division 

11 B of the American Recovery and Reinvestment 

12 Act of 2009) beginning on the date of the ter13 mination or separation involved; or 

14 ‘‘(B) the period permitted under any appli15 cable continuation of coverage provisions of the 

16 State in which the employee resides. 

17 ‘‘(3) ADMINISTRATION.—The Administrator 

18 shall develop guidelines for administering the provi19 sion of health plan coverage for employees under 

20 this subsection. Such guidelines shall address the 

21 rating rules for such continuation coverage in the 

22 calendar years prior to 2014 and shall provide for 

23 the administration of this section in a manner simi24 lar to the manner in which the COBRA continuation 

25 provisions (as such term is defined in section 

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1 3001(a)(10)(B) of division B of the American Re2 covery and Reinvestment Act of 2009) are adminis3 tered, including the collection of premiums by the 

4 Administrator. 

5 ‘‘(4) NONAPPLICATION OF PROVISIONS.—The 

6 COBRA continuation provisions (as such term is de7 fined in section 3001(a)(10)(B) of division B of the 

8 American Recovery and Reinvestment Act of 2009) 

9 shall not apply to an employee to which this sub10 section applies. 

11 ‘‘(g) RULE OF CONSTRUCTION.—Nothing in this title 

12 shall be construed to prohibit a health insurance issuer 

13 providing coverage through the program under this title 

14 from using the services of a licensed agent or broker. 

15 ‘‘SEC. 3107. HEALTH COVERAGE AVAILABLE WITHIN THE 

16 SMALL BUSINESS POOL. 

17 ‘‘(a) PREEXISTING CONDITION EXCLUSIONS.—Sec18 tion 2701 shall apply to coverage under this title, except 

19 that with respect to such coverage, the reference to ‘12 

20 months (or 18 months in the case of a late enrollee)’ in 

21 subsection (a)(2) of each such section shall be deemed to 

22 be ‘6 months’. The period involved shall be reduced by 

23 the aggregate of 1 day for each day that the individual 

24 was covered under creditable health insurance coverage 

25 (as defined for purposes of section 2701(c)) immediately 

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1 preceding the date the individual submitted an application 

2 for coverage under this title. 

3 ‘‘(b) RATES AND PREMIUMS; STATE LAWS.— 

4 ‘‘(1) IN GENERAL.—Rates charged and pre5 miums paid for a health benefits plan under this 

6 title— 

7 ‘‘(A) shall be determined in accordance 

8 with subsection (d); 

9 ‘‘(B) may be annually adjusted; and 

10 ‘‘(C) shall be adjusted to cover the admin11 istrative costs of the Administrator under this 

12 title and the office established under section 

13 3102. 

14 ‘‘(2) BENEFIT MANDATE LAWS.—With respect 

15 to a contract entered into under this title under 

16 which a health insurance issuer will offer health ben17 efits plan coverage, State mandated benefit laws in 

18 effect in the State in which the plan is offered shall 

19 continue to apply, except in the case of a nationwide 

20 plan. 

21 ‘‘(3) LIMITATION.—Nothing in this subsection 

22 shall be construed to preempt any State or local law 

23 (including any State grievance, claims, and appeals 

24 procedure laws, State provider mandate laws, and 

25 State network adequacy laws) except those laws and 

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1 regulations described in subsection (b)(2), (d)(2)(B), 

2 and (d)(5). 

3 ‘‘(c) TERMINATION AND REENROLLMENT.—If an in4 dividual who is enrolled in a health benefits plan under 

5 this title voluntarily terminates the enrollment, except in 

6 the case of an individual who has lost or changes employ7 ment or whose employer is terminated for failure to pay 

8 premiums, the individual shall not be eligible for reenroll9 ment until the first open enrollment period following the 

10 expiration of 6 months after the date of such termination. 

11 ‘‘(d) RATING RULES AND TRANSITIONAL APPLICA12 TION OF STATE LAW.— 

13 ‘‘(1) YEARS 2012 AND 2013.—With respect to 

14 calendar years 2012 and 2013 (open enrollment pe15 riod beginning October 1, 2011, and October 1, 

16 2012), the following shall apply: 

17 ‘‘(A) In the case of an employer that elects 

18 to participate in the program under this title, 

19 the State rating requirements applicable to em20 ployers purchasing health insurance coverage in 

21 the small group market in the State in which 

22 the employer is located shall apply with respect 

23 to such coverage, except that premium rates for 

24 such coverage shall not vary based on health25 status related factors. 

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1 ‘‘(B) State rating requirements shall apply 

2 to health insurance coverage purchased in the 

3 small group market in the State, except that a 

4 State shall be prohibited from allowing pre5 mium rates to vary based on health-status re6 lated factors. 

7 ‘‘(2) SUBSEQUENT YEARS.— 

8 ‘‘(A) NAIC RECOMMENDATIONS.— 

9 ‘‘(i) STUDY.—Beginning in 2010, the 

10 Administrator shall contract with the Na11 tional Association of Insurance Commis12 sioners to conduct a study of the rating re13 quirements utilized in the program under 

14 this title and the rating requirements that 

15 apply to health insurance purchased in the 

16 small group markets in the States, and to 

17 develop recommendations concerning rat18 ing requirements. Such recommendations 

19 shall be submitted to the appropriate com20 mittees of Congress during calendar year 

21 2012. 

22 ‘‘(ii) STATE LAW HARMONIZATION.— 

23 Beginning in calendar year 2011, the Ad24 ministrator shall contract with the Na25 tional Association of Insurance Commismstockstill on PROD1PC66 with BILLS

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1 sioners to conduct a study of administra2 tive procedures, including rate and form 

3 filing, standards of external review, and 

4 standards of internal review, that apply to 

5 the program under this title and to health 

6 insurance purchased in the small group 

7 markets in the States. 

8 ‘‘(iii) CONSULTATION.—In conducting 

9 the study under clause (i), the National 

10 Association of Insurance Commissioners 

11 shall consult with key stakeholders (includ12 ing small businesses, self-employed individ13 uals, employees of small businesses, health 

14 insurance issuers, healthcare providers, 

15 and patient advocates). 

16 ‘‘(iv) RECOMMENDATIONS.—During 

17 calendar year 2012, the recommendations 

18 of the National Association of Insurance 

19 Commissioners shall be submitted to Con20 gress (in the form of a legislative pro21 posal), and shall concern— 

22 ‘‘(I) rating requirements for 

23 health insurance coverage under this 

24 title for calendar year 2014 and sub25 sequent calendar years; and 

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1 ‘‘(II) a maximum permissible 

2 variance between State rating require3 ments and the rating requirements for 

4 coverage under this title that will 

5 allow State flexibility without causing 

6 significant adverse selection for health 

7 insurance coverage under this title. 

8 ‘‘(B) APPLICATION OF REQUIREMENTS.— 

9 If, pursuant to this subsection, an Act is en10 acted to implement rating requirements pursu11 ant to the recommendations submitted under 

12 subparagraph (A), or alternative rating require13 ments developed by Congress, such rating re14 quirements shall apply to the program under 

15 this title beginning in calendar year 2014 (open 

16 enrollment periods beginning October 1, 2013, 

17 and thereafter). 

18 ‘‘(3) FAILURE TO ENACT LEGISLATION.—If an 

19 Act is not enacted as provided for in paragraph 

20 (2)(B), the fallback rating rules under paragraph 

21 (5) shall apply beginning in calendar year 2014 

22 (open enrollment periods beginning October 1, 2013, 

23 and thereafter). 

24 ‘‘(4) EXPEDITED CONGRESSIONAL CONSIDER25 ATION.— 

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1 ‘‘(A) INTRODUCTION AND COMMITTEE

2 CONSIDERATION.— 

3 ‘‘(i) INTRODUCTION.—A legislative 

4 proposal submitted to Congress pursuant 

5 to paragraph (2) shall be introduced in the 

6 House of Representatives by the Speaker, 

7 and in the Senate by the majority leader, 

8 immediately upon receipt of the language 

9 and shall be referred to the appropriate 

10 committees of Congress. If the proposal is 

11 not introduced in accordance with the pre12 ceding sentence, legislation may be intro13 duced in either House of Congress by any 

14 member thereof. 

15 ‘‘(ii) COMMITTEE CONSIDERATION.— 

16 Legislation introduced in the House of 

17 Representatives and the Senate under 

18 clause (i) shall be referred to the appro19 priate committees of jurisdiction of the 

20 House of Representatives and the Senate. 

21 Not later than 45 calendar days after the 

22 introduction of the legislation or February 

23 15th, 2013, whichever is later, the com24 mittee of Congress to which the legislation 

25 was referred shall report the legislation or 

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1 a committee amendment thereto. If the 

2 committee has not reported such legislation 

3 (or identical legislation) at the end of 45 

4 calendar days after its introduction, or 

5 February 15th, 2013, whichever is later, 

6 such committee shall be deemed to be dis7 charged from further consideration of such 

8 legislation and such legislation shall be 

9 placed on the appropriate calendar of the 

10 House involved. 

11 ‘‘(B) EXPEDITED PROCEDURE.— 

12 ‘‘(i) CONSIDERATION.—Not later than 

13 15 calendar days after the date on which 

14 a committee has been or could have been 

15 discharged from consideration of legislation 

16 under this paragraph, the Speaker of the 

17 House of Representatives, or the Speaker’s 

18 designee, or the majority leader of the Sen19 ate, or the leader’s designee, shall move to 

20 proceed to the consideration of the com21 mittee amendment to the legislation, and if 

22 there is no such amendment, to the legisla23 tion. It shall also be in order for any mem24 ber of the House of Representatives or the 

25 Senate, respectively, to move to proceed to 

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1 the consideration of the legislation at any 

2 time after the conclusion of such 15-day 

3 period. All points of order against the leg4 islation (and against consideration of the 

5 legislation) with the exception of points of 

6 order under the Congressional Budget Act 

7 of 1974 are waived. A motion to proceed to 

8 the consideration of the legislation is high9 ly privileged in the House of Representa10 tives and is privileged in the Senate and is 

11 not debatable. The motion is not subject to 

12 amendment, to a motion to postpone con13 sideration of the legislation, or to a motion 

14 to proceed to the consideration of other 

15 business. A motion to reconsider the vote 

16 by which the motion to proceed is agreed 

17 to or not agreed to shall not be in order. 

18 If the motion to proceed is agreed to, the 

19 House of Representatives or the Senate, as 

20 the case may be, shall immediately proceed 

21 to consideration of the legislation in ac22 cordance with the Standing Rules of the 

23 House of Representatives or the Senate, as 

24 the case may be, without intervening mo25 tion, order, or other business, and the resomstockstill on PROD1PC66 with BILLS

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1 lution shall remain the unfinished business 

2 of the House of Representatives or the 

3 Senate, as the case may be, until disposed 

4 of, except as provided in clause (iii). 

5 ‘‘(ii) CONSIDERATION BY OTHER

6 HOUSE.—If, before the passage by one 

7 House of the legislation that was intro8 duced in such House, such House receives 

9 from the other House legislation as passed 

10 by such other House— 

11 ‘‘(I) the legislation of the other 

12 House shall not be referred to a com13 mittee and shall immediately displace 

14 the legislation that was introduced in 

15 the House in receipt of the legislation 

16 of the other House; and 

17 ‘‘(II) the legislation of the other 

18 House shall immediately be considered 

19 by the receiving House under the 

20 same procedures applicable to legisla21 tion reported by or discharged from a 

22 committee under this paragraph. 

23 ‘‘Upon disposition of legislation that 

24 is received by one House from the other 

25 House, it shall no longer be in order to 

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1 consider the legislation that was introduced 

2 in the receiving House. 

3 ‘‘(iii) SENATE VOTE REQUIREMENT.— 

4 Legislation under this paragraph shall only 

5 be approved in the Senate if affirmed by 

the votes of 3 6 ⁄5 of the Senators duly chosen 

7 and sworn. If legislation in the Senate has 

8 not reached final passage within 10 days 

9 after the motion to proceed is agreed to 

10 (excluding periods in which the Senate is 

11 in recess) it shall be in order for the ma12 jority leader to file a cloture petition on 

13 the legislation or amendments thereto, in 

14 accordance with rule XXII of the Standing 

15 Rules of the Senate. If such a cloture mo16 tion on the legislation fails, it shall be in 

17 order for the majority leader to proceed to 

18 other business and the legislation shall be 

19 returned to or placed on the Senate cal20 endar. 

21 ‘‘(iv) CONSIDERATION IN CON22 FERENCE.—Immediately upon a final pas23 sage of the legislation that results in a dis24 agreement between the two Houses of Con25 gress with respect to the legislation, conmstockstill on PROD1PC66 with BILLS

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1 ferees shall be appointed and a conference 

2 convened. Not later than 15 days after the 

3 date on which conferees are appointed (ex4 cluding periods in which one or both 

5 Houses are in recess), the conferees shall 

6 file a report with the House of Representa7 tives and the Senate resolving the dif8 ferences between the Houses on the legisla9 tion. Notwithstanding any other rule of the 

10 House of Representatives or the Senate, it 

11 shall be in order to immediately consider a 

12 report of a committee of conference on the 

13 legislation filed in accordance with this 

14 subclause. Debate in the House of Rep15 resentatives and the Senate on the con16 ference report shall be limited to 10 hours, 

17 equally divided and controlled by the 

18 Speaker of the House of Representatives 

19 and the minority leader of the House of 

20 Representatives or their designees and the 

21 majority and minority leaders of the Sen22 ate or their designees. A vote on final pas23 sage of the conference report shall occur 

24 immediately at the conclusion or yielding 

25 back of all time for debate on the conmstockstill on PROD1PC66 with BILLS

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1 ference report. The conference report shall 

2 be approved in the Senate only if affirmed 

by the votes of 3 3 ⁄5 of the Senators duly 

4 chosen and sworn. 

5 ‘‘(C) RULES OF THE SENATE AND HOUSE

6 OF REPRESENTATIVES.—This paragraph is en7 acted by Congress— 

8 ‘‘(i) as an exercise of the rulemaking 

9 power of the Senate and House of Rep10 resentatives, respectively, and is deemed to 

11 be part of the rules of each House, respec12 tively, but applicable only with respect to 

13 the procedure to be followed in that House 

14 in the case of legislation under this para15 graph, and it supersedes other rules only 

16 to the extent that it is inconsistent with 

17 such rules; and 

18 ‘‘(ii) with full recognition of the con19 stitutional right of either House to change 

20 the rules (so far as they relate to the pro21 cedure of that House) at any time, in the 

22 same manner, and to the same extent as in 

23 the case of any other rule of that House. 

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1 ‘‘(5) FALLBACK RATING RULES.—For purposes 

2 of paragraph (3), the fallback rating rules are as fol3 lows: 

4 ‘‘(A) PROGRAM.— 

5 ‘‘(i) RATING RULES.—A health insur6 ance issuer that enters into a contract 

7 under the program under this title shall 

8 determine the amount of premiums to as9 sess for coverage under a health benefits 

10 plan based on a community rate that may 

11 be annually adjusted only— 

12 ‘‘(I) based on the age of covered 

13 individuals (subject to clause (iii)); 

14 ‘‘(II) based on the geographic 

15 area involved if the adjustment is 

16 based on geographical divisions that 

17 are not smaller than a metropolitan 

18 statistical area and the issuer provides 

19 evidence of geographic variation in 

20 cost of services; 

21 ‘‘(III) based on industry (subject 

22 to clause (iv)); 

23 ‘‘(IV) based on tobacco use; and 

24 ‘‘(V) based on whether such cov25 erage is for an individual, 2 adults in 

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1 a household, 1 adult and 1 or more 

2 children, or a family. 

3 ‘‘(ii) LIMITATION.—Premium rates 

4 charged for coverage under the program 

5 under this title shall not vary based on 

6 health-status related factors, gender, class 

7 of business, or claims experience or any 

8 other factor not described in clause (i). 

9 ‘‘(iii) AGE ADJUSTMENTS.— 

10 ‘‘(I) IN GENERAL.—With respect 

11 to clause (i)(I), in making adjust12 ments based on age, the Adminis13 trator shall establish not more than 5 

14 age brackets to be used by a health 

15 insurance issuer in establishing rates 

16 for individuals under the age of 65. 

17 The rates for any age bracket shall 

18 not exceed 300 percent of the rate for 

19 the lowest age bracket. Age-related 

20 premiums may not vary within age 

21 brackets. 

22 ‘‘(II) AGES 65 AND OLDER.— 

23 With respect to clause (i)(I), a health 

24 insurance issuer may develop separate 

25 rates for covered individuals who are 

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1 65 years of age or older for whom the 

2 primary payor for health benefits cov3 erage is the Medicare program under 

4 title XVIII of the Social Security Act, 

5 for the coverage of health benefits 

6 that are not otherwise covered under 

7 Medicare. 

8 ‘‘(iv) INDUSTRY ADJUSTMENT.—With 

9 respect to clause (i)(III), in making adjust10 ments based on industry, the rates for any 

11 industry shall not exceed 115 percent of 

12 the rate for the lowest industry and shall 

13 be based on evidence of industry variation 

14 in cost of services. 

15 ‘‘(B) STATE RATING RULES.—State rating 

16 requirements shall apply to health insurance 

17 coverage purchased in the small group market, 

18 except that a State shall not permit premium 

19 rates to vary based on health-status related fac20 tors. 

21 ‘‘(6) STATE WITH LESS PREMIUM VARIATION.— 

22 Effective beginning in calendar year 2014, in the 

23 case of a State that provides a rating variance with 

24 respect to age that is less than the Federal limit es25 tablished under paragraph (2)(B) or (3) or that promstockstill on PROD1PC66 with BILLS

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1 vides for some form of community rating, or that 

2 provides a rating variance with respect to industry 

3 that is less than the Federal limit established under 

4 paragraph (2)(B) or (3), or that provides a rating 

5 variance with respect to the geographic area involved 

6 that is less than the Federal limit established in 

7 paragraph (2)(B) or (3), premium rates charged for 

8 health insurance coverage under this title in such 

9 State with respect to such factor shall reflect the 

10 rating requirements of such State. 

11 ‘‘(7) EMPLOYEE CHOICE.— 

12 ‘‘(A) CALENDAR YEARS 2012 AND 2013.— 

13 With respect to calendar years 2012 and 2013 

14 (open enrollment periods beginning October 1, 

15 2011, and October 1, 2012), in the case of a 

16 State that applies community rating or adjusted 

17 community rating where any age bracket does 

18 not exceed 300 percent of the lowest age brack19 et, employees of an employer located in that 

20 State may elect to enroll in any health plan of21 fered under this title. 

22 ‘‘(B) SUBSEQUENT YEARS.—Beginning in 

23 calendar year 2014 (open enrollment periods 

24 beginning October 1, 2013, and thereafter), em25 ployees of an employer that participates in the 

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1 program under this title may elect to enroll in 

2 any health plan offered under this title. 

3 ‘‘(C) EXCEPTION.—In any State or year in 

4 which an employee is not able to select a health 

5 plan as provided for in subparagraph (A) or 

6 (B), the employer shall select the health plan or 

7 plans that shall be made available to the em8 ployees of such employer. 

9 ‘‘(8) STATE APPROVAL OF RATES.—State laws 

10 requiring the approval of rates with respect to health 

11 insurance shall continue to apply to health insurance 

12 coverage under this title in such State unless the 

13 State fails to enforce the application of rates that 

14 would otherwise apply to health insurance issuers 

15 under the program under this title. 

16 ‘‘(e) BENEFITS.— 

17 ‘‘(1) STATEMENT OF BENEFITS.—Each con18 tract under this title shall contain a detailed state19 ment of benefits offered and shall include informa20 tion concerning such maximums, limitations, exclu21 sions, and other definitions of benefits as the Ad22 ministrator considers necessary or reasonable. 

23 ‘‘(2) NATIONWIDE PLANS.— 

24 ‘‘(A) IN GENERAL.—In the case of con25 tracts with health insurance issuers that offer a 

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1 health benefit plan on a nationwide basis, the 

2 benefit package shall include benefits estab3 lished by the Administrator. 

4 ‘‘(B) PROCESS FOR ESTABLISHING BENE5 FITS FOR NATIONWIDE PLANS.—The benefits 

6 provided for under subparagraph (A) shall be 

7 determined as follows: 

8 ‘‘(i) Not later than 30 days after the 

9 date of enactment of this title, the Sec10 retary shall enter into a contract with the 

11 Institute of Medicine to develop a min12 imum set of benefits to be offered by na13 tionwide plans. 

14 ‘‘(ii) In developing such minimum set 

15 of benefits, the Institute of Medicine shall 

16 convene public forums to allow input from 

17 key stakeholders (including small busi18 nesses, self-employed individuals, employ19 ees of small businesses, health insurance 

20 issuers, insurance regulators, healthcare 

21 providers, and patient advocates) and shall 

22 consult with the Small Business Health 

23 Board. 

24 ‘‘(iii) The Institute of Medicine shall 

25 consider— 

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1 ‘‘(I) the clinical appropriateness 

2 and effectiveness of the benefits cov3 ered; 

4 ‘‘(II) the affordability of the ben5 efits covered; 

6 ‘‘(III) the financial protection of 

7 enrollees against high healthcare ex8 penses; 

9 ‘‘(IV) access to necessary 

10 healthcare services, including preven11 tive health services; and 

12 ‘‘(V) benefits similar to those 

13 available in the small group market 

14 on the date of enactment of this title. 

15 ‘‘(iv) The benefits package shall not 

16 be discriminatory or be likely to promote 

17 or induce adverse selection. 

18 ‘‘(v) The Administrator shall publish 

19 the benefits recommended by the Institute 

20 of Medicine for public comment. 

21 ‘‘(vi) Based on the comments received, 

22 the Administrator may make changes only 

23 to the extent that the recommendation 

24 from the Institute of Medicine is not con25 sistent with the criteria contained in clause 

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1 (iii) or there is a compelling need for the 

2 changes to ensure the effective functioning 

3 of the program. 

4 ‘‘(vii) The Administrator shall submit 

5 a report to Congress on the benefits in6 cluded in the nationwide package. 

7 ‘‘(C) CHANGES TO BENEFITS.— 

8 ‘‘(i) IN GENERAL.—By a vote of a 

9 two-thirds majority, the Small Business 

10 Health Board may recommend to the Ad11 ministrator changes to the benefit package 

12 for nationwide plans under this paragraph 

13 for years subsequent to the first year in 

14 which such benefits are in effect. 

15 ‘‘(ii) REDUCTION IN BENEFITS.—The 

16 Administrator may reduce benefits that 

17 were previously covered under this para18 graph only if— 

19 ‘‘(I) two-thirds of the Small 

20 Business Health Board recommend 

21 such change; or 

22 ‘‘(II) there is a compelling need 

23 for the change to prevent a substan24 tial reduction in participation in the 

25 program under this title. 

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1 ‘‘(f) ADDITIONAL PREMIUM FOR DELAYED ENROLL2 MENT.— 

3 ‘‘(1) IN GENERAL.—A self-employed individual 

4 who is eligible to participate in the program under 

5 this title, who does not reside in a State where a 

6 self-employed individual is eligible for coverage in 

7 the small group market, and who does not elect to 

8 enroll in coverage under such program in the first 

9 year in which the self-employed individual is eligible 

10 to so enroll, shall be subject to an additional pre11 mium for delayed enrollment. 

12 ‘‘(2) AMOUNT.—The Administrator shall estab13 lish the amount of the additional premium under 

14 paragraph (1), which shall be the amount deter15 mined by the Administrator to be actuarially appro16 priate, to encourage enrollment, and to reduce ad17 verse selection. The amount of the additional pre18 mium shall be calculated by the Administrator based 

19 on the number of years specified in paragraph (4). 

20 ‘‘(3) PAYMENT.—A self-employed individual 

21 shall pay the additional premium under this sub22 section, if any, for a period of time equal to the 

23 number of years specified in paragraph (4). After 

24 the expiration of such period the additional premium 

25 for delayed enrollment shall be terminated. 

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1 ‘‘(4) YEARS.—The number of years specified in 

2 this paragraph is the number of years that the self3 employed individual involved was eligible to partici4 pate in the program under this title but did not en5 roll in coverage under such program and did not 

6 otherwise have creditable coverage (as defined for 

7 purposes of section 2701(c)). 

8 ‘‘(g) STATE ENFORCEMENT.— 

9 ‘‘(1) STATE AUTHORITY.—With respect to the 

10 enforcement of provisions in this title that supersede 

11 State law (as described in paragraph (2)), a State 

12 may require that health insurance issuers that issue, 

13 sell, renew, or offer health insurance coverage in the 

14 State in the small group market or through the pro15 gram under this title, comply with the requirements 

16 of this title with respect to such issuers. 

17 ‘‘(2) PROVISIONS DESCRIBED.—The provisions 

18 described in this paragraph shall include the fol19 lowing: 

20 ‘‘(A) Prohibitions on varying premium 

21 rates based on health-status related factors 

22 (subsections (d)(1)(A) and (B) of section 

23 3107). 

24 ‘‘(B) The implementation of rating re25 quirements that shall apply to the program 

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1 under this title beginning in calendar year 2014 

2 (subsections (d)(2)(B) and (d)(3) of section 

3 3107). 

4 ‘‘(C) Benefit requirements for nationwide 

5 plans available in the program under this title 

6 (subsection (e)). 

7 ‘‘(3) FAILURE TO IMPLEMENT OR ENFORCE

8 PROVISIONS.—In the case of a determination by the 

9 Secretary that a State has failed to substantially en10 force a provision (or provisions) described in para11 graph (2) with respect to health insurance issuers in 

12 the State, the Secretary shall enforce such provision 

13 (or provisions). 

14 ‘‘(4) SECRETARIAL ENFORCEMENT AUTHOR15 ITY.—The Secretary shall have the same authority 

16 in relation to the enforcement of the provisions of 

17 this title with respect to issuers of health insurance 

18 coverage in a State as the Secretary has under sec19 tion 2722(b)(2) in relation to the enforcement of the 

20 provisions of part A of title XXVII with respect to 

21 issuers of health insurance coverage in the small 

22 group market in the State. 

23 ‘‘(h) STATE OPT OUT.—A State may prohibit small 

24 employers and self-employed individuals in the State from 

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1 participating in the program under this title if the Admin2 istrator finds that the State— 

3 ‘‘(1) defines its small group market to include 

4 groups of 1 (so that self-employed individuals are el5 igible for coverage in such market); 

6 ‘‘(2) prohibits the use of health-status related 

7 factors and other factors described in subsection 

8 (d)(5)(A); 

9 ‘‘(3) has in effect rating rules that— 

10 ‘‘(A) in calendar years 2012 and 2013, 

11 comply with subsection (d)(5)(A); and 

12 ‘‘(B) in calendar year 2014 and thereafter, 

13 comply with subsection (d)(2)(B) or (d)(3), 

14 whichever is in effect for such calendar year; 

15 except that such rules may impose limits on rating 

16 variation in addition to those provided for in such 

17 subsection; 

18 ‘‘(4) maintains a State-wide purchasing pool 

19 that provides purchasers in the small group market 

20 a choice of health benefits plans, with comparative 

21 information provided concerning such plans and the 

22 premiums charged for such plans made available 

23 through the Internet; and 

24 ‘‘(5) enacts a law to request an opt out under 

25 this subsection. 

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1 ‘‘SEC. 3108. ENCOURAGING PARTICIPATION BY HEALTH IN2 SURANCE ISSUERS THROUGH ADJUSTMENTS 

3 FOR RISK. 

4 ‘‘(a) APPLICATION OF RISK CORRIDORS.— 

5 ‘‘(1) IN GENERAL.—This section shall only 

6 apply to health insurance issuers with respect to 

7 health benefits plans offered under this Act during 

8 any of calendar years 2012 through 2014. 

9 ‘‘(2) NOTIFICATION OF COSTS UNDER THE

10 PLAN.—In the case of a health insurance issuer that 

11 offers a health benefits plan under this title in any 

12 of calendar years 2012 through 2014, the issuer 

13 shall notify the Administrator, before such date in 

14 the succeeding year as the Administrator specifies, 

15 of the total amount of costs incurred in providing 

16 benefits under the health benefits plan for the year 

17 involved and the portion of such costs that is attrib18 utable to administrative expenses. 

19 ‘‘(3) ALLOWABLE COSTS DEFINED.—For pur20 poses of this section, the term ‘allowable costs’ 

21 means, with respect to a health benefits plan offered 

22 by a health insurance issuer under this title, for a 

23 year, the total amount of costs described in para24 graph (2) for the plan and year, reduced by the por25 tion of such costs attributable to administrative exmstockstill on PROD1PC66 with BILLS

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1 penses incurred in providing the benefits described 

2 in such paragraph. 

3 ‘‘(b) ADJUSTMENT OF PAYMENT.— 

4 ‘‘(1) NO ADJUSTMENT IF ALLOWABLE COSTS

5 WITHIN 3 PERCENT OF TARGET AMOUNT.—If the al6 lowable costs for the health insurance issuer with re7 spect to the health benefits plan involved for a cal8 endar year are at least 97 percent, but do not exceed 

9 103 percent, of the target amount for the plan and 

10 year involved, there shall be no payment adjustment 

11 under this section for the plan and year. 

12 ‘‘(2) INCREASE IN PAYMENT IF ALLOWABLE

13 COSTS ABOVE 103 PERCENT OF TARGET AMOUNT.— 

14 ‘‘(A) COSTS BETWEEN 103 AND 108 PER15 CENT OF TARGET AMOUNT.—If the allowable 

16 costs for the health insurance issuer with re17 spect to the health benefits plan involved for 

18 the year are greater than 103 percent, but not 

19 greater than 108 percent, of the target amount 

20 for the plan and year, the Administrator shall 

21 reimburse the issuer for such excess costs 

22 through payment to the issuer of an amount 

23 equal to 75 percent of the difference between 

24 such allowable costs and 103 percent of such 

25 target amount. 

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1 ‘‘(B) COSTS ABOVE 108 PERCENT OF TAR2 GET AMOUNT.—If the allowable costs for the 

3 health insurance issuer with respect to the 

4 health benefits plan involved for the year are 

5 greater than 108 percent of the target amount 

6 for the plan and year, the Administrator shall 

7 reimburse the issuer for such excess costs 

8 through payment to the issuer in an amount 

9 equal to the sum of— 

10 ‘‘(i) 3.75 percent of such target 

11 amount; and 

12 ‘‘(ii) 90 percent of the difference be13 tween such allowable costs and 108 percent 

14 of such target amount. 

15 ‘‘(3) REDUCTION IN PAYMENT IF ALLOWABLE

16 COSTS BELOW 97 PERCENT OF TARGET AMOUNT.— 

17 ‘‘(A) COSTS BETWEEN 92 AND 97 PERCENT

18 OF TARGET AMOUNT.—If the allowable costs for 

19 the health insurance issuer with respect to the 

20 health benefits plan involved for the year are 

21 less than 97 percent, but greater than or equal 

22 to 92 percent, of the target amount for the plan 

23 and year, the issuer shall be required to pay 

24 into a contingency reserve fund established and 

25 maintained by the Administrator, an amount 

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1 equal to 75 percent of the difference between 

2 97 percent of the target amount and such al3 lowable costs. 

4 ‘‘(B) COSTS BELOW 92 PERCENT OF TAR5 GET AMOUNT.—If the allowable costs for the 

6 health insurance issuer with respect to the 

7 health benefits plan involved for the year are 

8 less than 92 percent of the target amount for 

9 the plan and year, the issuer shall be required 

10 to pay into the contingency fund established 

11 under subparagraph (A), an amount equal to 

12 the sum of— 

13 ‘‘(i) 3.75 percent of such target 

14 amount; and 

15 ‘‘(ii) 90 percent of the difference be16 tween 92 percent of such target amount 

17 and such allowable costs. 

18 ‘‘(4) TARGET AMOUNT DESCRIBED.— 

19 ‘‘(A) IN GENERAL.—For purposes of this 

20 subsection, the term ‘target amount’ means, 

21 with respect to a health benefits plan offered by 

22 an issuer under this title in any of calendar 

23 years 2012 through 2014, an amount equal 

24 to— 

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1 ‘‘(i) the total of the monthly pre2 miums estimated by the health insurance 

3 issuer and accepted by the Administrator 

4 to be paid for enrollees in the plan under 

5 this title for the calendar year involved; re6 duced by 

7 ‘‘(ii) the amount of administrative ex8 penses that the issuer estimates, and the 

9 Administrator accepts, will be incurred by 

10 the issuer with respect to the plan for such 

11 calendar year. 

12 ‘‘(B) SUBMISSION OF TARGET AMOUNT.— 

13 Not later than December 31, 2011, and each 

14 December 31 thereafter through calendar year 

15 2013, an issuer shall submit to the Adminis16 trator a description of the target amount for 

17 such issuer with respect to health benefits plans 

18 provided by the issuer under this title. 

19 ‘‘(c) DISCLOSURE OF INFORMATION.— 

20 ‘‘(1) IN GENERAL.—Each contract under this 

21 title shall provide— 

22 ‘‘(A) that a health insurance issuer offer23 ing a health benefits plan under this title shall 

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1 essary to carry out this subsection including the 

2 notification of costs under subsection (a)(2) and 

3 the target amount under subsection (b)(4)(B); 

4 and 

5 ‘‘(B) that the Administrator has the right 

6 to inspect and audit any books and records of 

7 the issuer that pertain to the information re8 garding costs provided to the Administrator 

9 under such subsections. 

10 ‘‘(2) RESTRICTION ON USE OF INFORMATION.— 

11 Information disclosed or obtained pursuant to the 

12 provisions of this subsection may be used by the of13 fice designated under section 3102(a) and its em14 ployees and contractors only for the purposes of, and 

15 to the extent necessary in, carrying out this section. 

16 ‘‘SEC. 3109. ADMINISTRATION THROUGH REGIONAL OR 

17 OTHER ADMINISTRATIVE ENTITIES. 

18 ‘‘(a) IN GENERAL.—In order to provide for the ad19 ministration of the benefits under this title with maximum 

20 efficiency and convenience for participating employers and 

21 healthcare providers and other individuals and entities 

22 providing services to such employers, the Administrator— 

23 ‘‘(1) shall enter into contracts with eligible enti24 ties, to the extent appropriate, to perform, on a re25 gional or other basis, activities to receive, disburse, 

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1 and account for payments of premiums to partici2 pating employers by individuals, and for payments 

3 by participating employers and employees to health 

4 insurance issuers; and 

5 ‘‘(2) may enter into contracts with eligible enti6 ties, to the extent appropriate, to perform, on a re7 gional or other basis, 1 or more of the following: 

8 ‘‘(A) Collect and maintain all information 

9 relating to individuals, families, and employers 

10 participating in the program under this title. 

11 ‘‘(B) Serve as a channel of communication 

12 between health insurance issuers, participating 

13 employers, and individuals relating to the ad14 ministration of this title. 

15 ‘‘(C) Otherwise carry out such activities 

16 for the administration of this title, in such 

17 manner, as may be provided for in the contract 

18 entered into under this section. 

19 ‘‘(b) APPLICATION.—To be eligible to receive a con20 tract under subsection (a), an entity shall prepare and 

21 submit to the Administrator an application at such time, 

22 in such manner, and containing such information as the 

23 Administration may require. 

24 ‘‘(c) PROCESS.— 

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1 ‘‘(1) COMPETITIVE BIDDING.—All contracts 

2 under this section shall be awarded through a com3 petitive bidding process on a biennial basis. 

4 ‘‘(2) REQUIREMENT.—No contract shall be en5 tered into with any entity under this section unless 

6 the Administrator finds that such entity will perform 

7 its obligations under the contract efficiently and ef8 fectively and will meet such requirements as to fi9 nancial responsibility, legal authority, and other 

10 matters as the Administrator finds pertinent. 

11 ‘‘(3) PUBLICATION OF STANDARDS AND CRI12 TERIA.—If the Administrator enters into contracts 

13 under subsection (a), the Administrator shall publish 

14 in the Federal Register standards and criteria for 

15 the efficient and effective performance of contract 

16 obligations under this section, and opportunity shall 

17 be provided for public comment prior to implementa18 tion. In establishing such standards and criteria, the 

19 Administrator shall provide for a system to measure 

20 an entity’s performance of responsibilities. 

21 ‘‘(4) TERM.—Each contract under this section 

22 shall be for a term of at least 2 years, and may be 

23 made automatically renewable from term to term in 

24 the absence of notice by either party of intention to 

25 terminate at the end of the current term, except that 

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1 the Administrator may terminate any such contract 

2 at any time (after such reasonable notice and oppor3 tunity for hearing to the entity involved as the Ad4 ministrator may provide in regulations) if the Ad5 ministrator finds that the entity has failed substan6 tially to carry out the contract or is carrying out the 

7 contract in a manner inconsistent with the efficient 

8 and effective administration of the program estab9 lished by this title. 

10 ‘‘(d) TERMS OF CONTRACT.—A contract entered into 

11 under this section shall include— 

12 ‘‘(1) a description of the duties of the con13 tracting entity; 

14 ‘‘(2) an assurance that the entity will furnish to 

15 the Administrator such timely information and re16 ports as the Administrator determines appropriate; 

17 ‘‘(3) an assurance that the entity will maintain 

18 such records and afford such access thereto as the 

19 Administrator finds necessary to assure the correct20 ness and verification of the information and reports 

21 under paragraph (2) and otherwise to carry out the 

22 purposes of this title; 

23 ‘‘(4) an assurance that the entity shall comply 

24 with such confidentiality and privacy protection 

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1 guidelines and procedures as the Administrator may 

2 require; 

3 ‘‘(5) an assurance that the entity does not have, 

4 and will continue to avoid, any conflicts of interest 

5 relative to any functions it will perform; and 

6 ‘‘(6) such other terms and conditions not incon7 sistent with this section as the Administrator may 

8 find necessary or appropriate. 

9 ‘‘SEC. 3110. PUBLIC EDUCATION CAMPAIGN AND REPORT. 

10 ‘‘(a) IN GENERAL.—In carrying out this title, the Ad11 ministrator shall develop and implement an educational 

12 campaign with interagency participation (including at a 

13 minimum the Small Business Administration, the Depart14 ment of Labor, and employees of the office established 

15 under section 3102 who oversee the provision of informa16 tion through navigators) to provide information to employ17 ers and the general public concerning the health insurance 

18 program developed under this title, including the contact 

19 information relating to an individual or individuals who 

20 will be available to resolve various types of problems with 

21 health insurance coverage provided under this title. 

22 ‘‘(b) PUBLIC EDUCATION CAMPAIGN.—There is au23 thorized to be appropriated to carry out this section, such 

24 sums as may be necessary for each of fiscal years 2009 

25 through 2011. 

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1 ‘‘(c) REPORTS TO CONGRESS.—Not later than 1 year 

2 and 2 years after the implementation of the campaign 

3 under subsection (a), the Administrator shall submit to 

4 the appropriate committees of Congress a report that de5 scribes the activities of the Administrator under sub6 section (a), including a determination by the Adminis7 trator of the percentage of employers with knowledge of 

8 the health benefits program under this title. 

9 ‘‘SEC. 3111. APPROPRIATIONS. 

10 ‘‘There are authorized to be appropriated to the Ad11 ministrator such sums as may be necessary in each fiscal 

12 year for the development and administration of the pro13 gram under this title. 

14 ‘‘SEC. 3112. EFFECTIVE DATE. 

15 ‘‘This title shall take effect on the date of enactment 

16 of this title.’’. 

17 SEC. 3. AMENDMENT TO ERISA. 

18 Section 514(b)(2) of the Employee Retirement In19 come Security Act of 1974 (29 U.S.C. 1144(b)(2)) is 

20 amended by adding at the end the following: 

21 ‘‘(C) Notwithstanding subparagraph (A), the provi22 sions of subsections (d)(1)(B) and (g)(2)(A) of section 

23 3107 of the Public Health Service Act (relating to the pro24 hibition on health-status related rating and the Federal 

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1 enforcement of such provisions) shall supercede any State 

2 law that conflicts with such provisions.’’. 

3 SEC. 4. CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH 

4 INSURANCE EXPENSES. 

5 (a) IN GENERAL.—Subpart D of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code of 

7 1986 (relating to credits) is amended by inserting after 

8 section 45N the following new section: 

9 ‘‘SEC. 45O. SMALL BUSINESS EMPLOYEE HEALTH INSUR10 ANCE CREDIT. 

11 ‘‘(a) DETERMINATION OF CREDIT.—In the case of a 

12 qualified small employer, there shall be allowed as a credit 

13 against the tax imposed by this chapter for the taxable 

14 year an amount equal to the credit amount described in 

15 subsection (b). 

16 ‘‘(b) GENERAL CREDIT AMOUNT.—For purposes of 

17 this section— 

18 ‘‘(1) IN GENERAL.—The credit amount de19 scribed in this subsection is the product of— 

20 ‘‘(A) the amount specified in paragraph 

21 (2), 

22 ‘‘(B) the employer size factor specified in 

23 paragraph (3), and 

24 ‘‘(C) the percentage of year factor specified 

25 in paragraph (4). 

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1 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

2 paragraph (1)— 

3 ‘‘(A) IN GENERAL.—The applicable 

4 amount is equal to— 

5 ‘‘(i) $1,000 for each employee of the 

6 employer who receives self-only health in7 surance coverage through the employer, 

8 ‘‘(ii) $2,000 for each employee of the 

9 employer who receives family health insur10 ance coverage through the employer, and 

11 ‘‘(iii) $1,500 for each employee of the 

12 employer who receives health insurance 

13 coverage for 2 adults or 1 adult and 1 or 

14 more children through the employer. 

15 ‘‘(B) BONUS FOR PAYMENT OF GREATER

16 PERCENTAGE OF PREMIUMS.—The applicable 

17 amount otherwise specified in subparagraph (A) 

18 shall be increased by $200 in the case of sub19 paragraph (A)(i), $400 in the case of subpara20 graph (A)(ii), and $300 in the case of subpara21 graph (A)(iii), for each additional 10 percent of 

22 the qualified employee health insurance ex23 penses exceeding 60 percent which are paid by 

24 the qualified small employer. 

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1 ‘‘(3) EMPLOYER SIZE FACTOR.—For purposes 

2 of paragraph (1), the employer size factor is the per3 centage determined in accordance with the following 

4 table: 

‘‘If the employer size is: The percentage is: 

10 or fewer full-time employees 100% 

More than 10 but not more than 20 full-time employees 80% 

More than 20 but not more than 30 full-time employees 60% 

More than 30 but not more than 40 full-time employees 40% 

More than 40 but not more than 50 full-time employees 20% 

More than 50 full-time employees 0% 

5 ‘‘(4) PERCENTAGE OF YEAR FACTOR.—For pur6 poses of paragraph (1), the percentage of year factor 

7 is equal to the ratio of— 

8 ‘‘(A) the number of months during the tax9 able year for which the employer paid or in10 curred qualified employee health insurance ex11 penses, and 

12 ‘‘(B) 12. 

13 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur14 poses of this section— 

15 ‘‘(1) QUALIFIED SMALL EMPLOYER.— 

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

17 small employer’ means any employer (as defined 

18 in section 3101(a)(4) of the Public Health 

19 Service Act) which— 

20 ‘‘(i) either— 

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1 ‘‘(I) purchases health insurance 

2 coverage for its employees in a small 

3 group market in a State which meets 

4 the requirements under subparagraph 

5 (B), or 

6 ‘‘(II) with respect to any taxable 

7 year beginning after 2011, is a par8 ticipating employer (as defined in sec9 tion 3101(a)(8) of such Act) in the 

10 program under title XXX of such Act, 

11 ‘‘(ii) pays or incurs at least 60 per12 cent of the qualified employee health insur13 ance expenses of such employer or is self14 employed, and 

15 ‘‘(iii) employed an average of 50 or 

16 fewer full-time employees during the pre17 ceding taxable year or was a self-employed 

18 individual with either not less than $5,000 

19 in net earnings or not less than $15,000 in 

20 gross earnings from self-employment in the 

21 preceding taxable year. 

22 ‘‘(B) STATE SMALL GROUP MARKET RE23 QUIREMENTS.—A State meets the requirements 

24 of this subparagraph if— 

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1 ‘‘(i) during calendar years 2010 and 

2 2011, the State— 

3 ‘‘(I) defines its small group mar4 ket to include groups of one (so that 

5 self-employed individuals are eligible 

6 for coverage in such market), 

7 ‘‘(II) prohibits the use of health8 status related factors and other fac9 tors described in section 

10 3107(d)(5)(A) of such Act, and 

11 ‘‘(III) has in effect rating rules 

12 that comply with section 

13 3107(d)(5)(A) of such Act (except 

14 that such rules may impose limits on 

15 rating variation in addition to those 

16 provided for in such section), 

17 ‘‘(ii) during calendar years 2012 and 

18 2013, the State— 

19 ‘‘(I) meets the requirements 

20 under clause (i), and 

21 ‘‘(II) maintains a State-wide pur22 chasing pool that provides purchasers 

23 in the small group market a choice of 

24 health benefit plans, with comparative 

25 information provided concerning such 

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1 plans and the premiums charged for 

2 such plans made available through the 

3 Internet, and 

4 ‘‘(iii) for calendar years after 2013, 

5 the State— 

6 ‘‘(I) meets the requirements 

7 under clauses (i)(I), (i)(II), and 

8 (ii)(II), and 

9 ‘‘(II) has in effect rating rules 

10 that comply with paragraph (2)(B) or 

11 (3) of section 3107(d) of such Act, 

12 whichever is in effect for such cal13 endar year (except that such rules 

14 may impose limits on rating variation 

15 in addition to those provided for in 

16 such section). 

17 ‘‘(2) QUALIFIED EMPLOYEE HEALTH INSUR18 ANCE EXPENSES.— 

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

20 employee health insurance expenses’ means any 

21 amount paid by an employer or an employee of 

22 such employer for health insurance coverage 

23 under such Act to the extent such amount is at24 tributable to coverage— 

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1 ‘‘(i) provided to any employee (as de2 fined in subsection 3101(a)(3) of such 

3 Act), or 

4 ‘‘(ii) for the employer, in the case of 

5 a self-employed individual. 

6 ‘‘(B) EXCEPTION FOR AMOUNTS PAID

7 UNDER SALARY REDUCTION ARRANGEMENTS.— 

8 No amount paid or incurred for health insur9 ance coverage pursuant to a salary reduction 

10 arrangement shall be taken into account under 

11 subparagraph (A). 

12 ‘‘(3) FULL-TIME EMPLOYEE.—The term ‘full13 time employee’ means, with respect to any period, an 

14 employee (as defined in section 3101(a)(3) of such 

15 Act) of an employer if the average number of hours 

16 worked by such employee in the preceding taxable 

17 year for such employer was at least 35 hours per 

18 week. 

19 ‘‘(d) INFLATION ADJUSTMENT.— 

20 ‘‘(1) IN GENERAL.—For each taxable year after 

21 2010, the dollar amounts specified in subsections 

22 (b)(2)(A), (b)(2)(B), and (c)(1)(A)(iii) (after the ap23 plication of this paragraph) shall be the amounts in 

24 effect in the preceding taxable year or, if greater, 

25 the product of— 

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1 ‘‘(A) the corresponding dollar amount 

2 specified in such subsection, and 

3 ‘‘(B) the ratio of the index of wage infla4 tion (as determined by the Bureau of Labor 

5 Statistics) for August of the preceding calendar 

6 year to such index of wage inflation for August 

7 of 2009. 

8 ‘‘(2) ROUNDING.—If any amount determined 

9 under paragraph (1) is not a multiple of $100, such 

10 amount shall be rounded to the next lowest multiple 

11 of $100. 

12 ‘‘(e) APPLICATION OF CERTAIN RULES IN DETER13 MINATION OF EMPLOYER SIZE.—For purposes of this sec14 tion— 

15 ‘‘(1) APPLICATION OF AGGREGATION RULE FOR

16 EMPLOYERS.—All persons treated as a single em17 ployer under subsection (b), (c), (m), or (o) of sec18 tion 414 shall be treated as 1 employer. 

19 ‘‘(2) EMPLOYERS NOT IN EXISTENCE IN PRE20 CEDING YEAR.—In the case of an employer which 

21 was not in existence for the full preceding taxable 

22 year, the determination of whether such employer 

23 meets the requirements of this section shall be based 

24 on the average number of full-time employees that it 

25 is reasonably expected such employer will employ on 

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1 business days in the employer’s first full taxable 

2 year. 

3 ‘‘(3) PREDECESSORS.—Any reference in this 

4 subsection to an employer shall include a reference 

5 to any predecessor of such employer. 

6 ‘‘(f) COORDINATION WITH ADVANCE PAYMENTS OF

7 CREDIT.—With respect to any taxable year, the amount 

8 which would (but for this subsection) be allowed as a cred9 it to the taxpayer under subsection (a) shall be reduced 

10 by the aggregate amount paid on behalf of such taxpayer 

11 under section 7527A for months beginning in such taxable 

12 year. If the amount determined under this subsection is 

13 less than zero, the taxpayer shall owe additional tax in 

14 such amount under this chapter. 

15 ‘‘(g) CREDITS FOR NONPROFIT ORGANIZATIONS.— 

16 Any credit which would be allowable under subsection (a) 

17 with respect to a qualified small business if such qualified 

18 small business were not exempt from tax under this chap19 ter shall be treated as a credit allowable under this sub20 part to such qualified small business.’’. 

21 (b) ADVANCE PAYMENTS OF CREDIT.—Chapter 77 

22 of the Internal Revenue Code of 1986 is amended by in23 serting after section 7527 the following new section: 

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1 ‘‘SEC. 7527A. ADVANCE PAYMENT OF CREDIT FOR HEALTH 

2 INSURANCE COSTS FOR QUALIFIED SMALL 

3 EMPLOYERS. 

4 ‘‘(a) GENERAL RULE.—Not later than December 31, 

5 2009, the Secretary shall establish a program for making 

6 monthly payments on behalf of qualified small employers 

7 to the program established under title XXX of the Public 

8 Health Service Act. The amount of the monthly payment 

9 for a qualified small employer shall be one-twelfth of the 

10 amount of the credit for the tax year to which the qualified 

11 small employer is entitled under section 36. If a monthly 

12 payment is made by the Secretary for which the employer 

13 is not entitled to a corresponding credit, the employer shall 

14 owe additional tax in such amount under this chapter. 

15 ‘‘(b) QUALIFIED SMALL EMPLOYER.—For purposes 

16 of this section, the term ‘qualified small employer’ has the 

17 meaning given such term in section 36(c)(1).’’. 

18 (c) CONFORMING AMENDMENTS.— 

19 (1) The table of sections for subpart D of part 

20 IV of subchapter A of chapter 1 of the Internal Rev21 enue Code of 1986 is amended by adding at the end 

22 the following new items: 

‘‘Sec. 45O. Small business employee health insurance credit.’’. 

23 (2) The table of sections for chapter 77 of such 

24 Code is amended by inserting after the item relating 

25 to section 7527 the following new item: 

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‘‘Sec. 7527A. Advance payment of credit for health insurance costs for qualified 

small employers.’’. 

1 (d) DEDUCTIBILITY.—The payment of premiums by 

2 a participating employer under this Act shall be consid3 ered to be an ordinary and necessary expense in carrying 

4 on a trade or business for purposes of the Internal Rev5 enue Code of 1986 and shall be deductible. 

6 (e) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to amounts paid or incurred in tax8 able years beginning after December 31, 2009. 

Æ 

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