89–008

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 107–184

PROVIDING FOR CONSIDERATION OF H.R. 2563, BIPARTISAN

PATIENT PROTECTION ACT

AUGUST 2 (legislative day, AUGUST 1), 2001.—Referred to the House Calendar and

ordered to be printed

Mr. GOSS, from the Committee on Rules, submitted the following

REPORT

[To accompany H. Res. 219]

The Committee on Rules, having had under consideration House

Resolution 219, by a record vote of 7 to 3, report the same to the

House with the recommendation that the resolution be adopted.

SUMMARY OF PROVISIONS OF THE RESOLUTION

The resolution provides for consideration of H.R. 2563, the Bipartisan Patient Protection Act, under a structured rule. The rule provides two hours of general debate equally divided and controlled by

the chairman and ranking minority member of the Committee on

Energy and Commerce, the Committee on Ways and Means and

the Committee on Education and the Workforce. The rule waives

all points of order against consideration of the bill.

The rule makes in order only the amendments printed in the

Rules Committee report accompanying the resolution, which may

be offered only in the order printed in the report, may be offered

only by a Member designated in the report, shall be considered as

read, shall be debatable for the time specified in the report equally

divided and controlled by the proponent and an opponent, shall not

be subject to amendment, and shall not be subject to a demand for

division of the question in the House or in the Committee of the

Whole. The rule waives all points of order against the amendments

printed in the report.

Finally, the rule provides one motion to recommit with or without instructions.

COMMITTEE VOTES

Pursuant to clause 3(b) of House rule XIII the results of each

record vote on an amendment or motion to report, together with

the names of those voting for and against, are printed below:

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Rules Committee record vote No. 40

Date: August 1, 2001.

Measure: H.R. 2563.

Motion By: Mr. Frost.

Summary of Motion: To make in order the amendment in the nature of a substitute by Representatives Ganske and Dingell which

is identical to H.R. 2563, but adds Title VIII, which fully offsets the

bill with non-Medicare and non-Social Security surplus dollars by

clarifying the customs user fees will be extended through 2011

rather than 2006. Also makes a series of changes to the tax code

to reduce fraudulent tax shelters by clarifying and slightly

strengthening the economic substance doctrine, modifying penalty

provisions in circumstances involving tax avoidance strategies that

have no economic substance, and halting the importation of foreign

losses.

Results: Defeated 3 to 6.

Vote by Member: Goss—nay; Linder—nay; Pryce—nay; Hastings

(WA)—nay; Myrick—nay; Frost—yea; Hall—yea; Hastings (FL)—

yea; Dreier—nay.

Rules Committee record vote No. 41

Date: August 1, 2001.

Measure: H.R. 2563.

Motion By: Mr. Goss.

Summary of Motion: To report the resolution.

Results: Agreed to 7 to 3.

Vote by Member: Goss—yea; Linder—yea; Pryce—yea; Hastings

(WA)—yea; Myrick—yea; Sessions—yea; Frost—nay; Hall—nay;

Hastings (FL)—nay; Dreier—yea.

SUMMARY OF AMENDMENTS MADE IN ORDER UNDER THE RULE

(Summaries derived from information provided by sponsors.)

Thomas/Lipinski/Fletcher/Phelps/Johnson, Sam/Dooley/Cooksey/

Lucas (KY)/Hunter: Adds Association Health Plans to the bill and

strikes section 511 (Limitations on Number of Medical Savings Accounts (MSAs)), replacing it with fully expanded MSAs. (40 minutes)

Norwood: Provides patient protections and the right to independent medical review for denials of medical care by the health

plan; guarantees patients new federal remedies to hold their health

plans accountable when they have been injured by wrongful denial

or delay of medical care; allows cases against employers to be removed to federal court by the defendant; allows cases against

health insurers to be heard in state court; allows employers to designate decision makers who will have sole liability for benefit determinations; ensures that patients must exhaust the independent

medical review process before seeking expanded damages in court;

allows patients to seek injunctive relief at any time for irreparable

harm; allows unlimited economic damages in both federal and state

court; limits non-economic damages at $1.5 million; provides that

punitive damages will be capped at $1.5 million and will be available only where the designated decision maker fails to comply with

the independent medical reviewer’s decision that the claim for benefits should be granted; and limits class action lawsuits under

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ERISA and RICO to participants in a group health plan established by a single plan sponsor. (60 minutes)

Thomas/Cox/Sensenbrenner/Tauzin/Boehner: Reforms the medical malpractice laws for health care providers to place time limits

on lawsuits, cap damages, establish the collateral source rule, provide for several liability, and protect against lawsuits for products

that meet FDA standards. Grandfathers existing laws and allows

future state laws to supercede federal standards. (40 minutes)

Text of Amendments made in order under the rule:

1. AN AMENDMENT TO BE OFFERED BY REPRESENTATIVE THOMAS OF

CALIFORNIA, OR REPRESENTATIVE LIPINSKI OF ILLINOIS, OR A DESIGNEE, DEBATABLE FOR 40 MINUTES

Insert before section 401 the following heading (and conform the

table of contents accordingly):

Subtitle A—General Provisions

In section 301(a), insert ‘‘subtitle A of’’ before ‘‘title IV’’.

Add at the end of title IV the following new subtitle (and conform

the table of contents accordingly):

Subtitle B—Association Health Plans

SEC. 421. RULES GOVERNING ASSOCIATION HEALTH PLANS.

(a) IN GENERAL.—Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding after part

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‘‘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 whose sponsor is (or

is deemed under this part to be) described in subsection (b).

‘‘(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 requires for membership

payment on a periodic basis of dues or payments necessary to

maintain eligibility for membership in the sponsor; and

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‘‘(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 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 Bipartisan Patient Protection Act,

‘‘(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 crosssection 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,

consisting of any of the following: agriculture; equipment and

automobile dealerships; barbering and cosmetology; certified

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public accounting practices; child care; construction; dance,

theatrical and orchestra productions; disinfecting and pest control; financial services; fishing; foodservice establishments; hospitals; labor organizations; logging; manufacturing (metals);

mining; medical and dental practices; medical laboratories;

professional consulting services; sanitary services; transportation (local and freight); warehousing; wholesaling/distributing; or any other trade or business or industry which has

been indicated as having average or above-average risk or

health claims experience by reason of State rate filings, denials

of coverage, proposed premium rate levels, or other means

demonstrated by such plan in accordance with regulations

which the Secretary shall prescribe through negotiated rulemaking.

‘‘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.

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‘‘(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 Bipartisan Patient Protection Act. ‘‘(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, 2001, 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).

‘‘(3) CONSTRUCTION.—A group health plan described in paragraph (2) shall only be treated as an association health plan

under this part if the sponsor of the plan applies for, and obtains, certification of the plan as an association health plan

under this part.

‘‘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—

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‘‘(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 Bipartisan Patient Protection Act, 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.

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‘‘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 RE- SPECT 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, Statelicensed 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

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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) ABILITY OF ASSOCIATION HEALTH PLANS TO DESIGN BENEFIT

OPTIONS.—Subject to section 514(e), 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

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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. 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

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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);

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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.—

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‘‘(1) IN GENERAL.—Within 90 days after the date of the enactment of the Bipartisan Patient Protection Act, 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.

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‘‘(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 LI- ABILITIES.—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 EX- PENSES.—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

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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.

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‘‘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 neVerDate 11-MAY-2000 18:28 Aug 06, 2001 Jkt 089006 PO 00000 Frm 00016 Fmt 6659 Sfmt 6602 E:\HR\OC\HR184.XXX pfrm11 PsN: HR184
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gotiated 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 in

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.

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‘‘(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 Bipartisan Patient Protection Act.

‘‘(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 covVerDate 11-MAY-2000 18:28 Aug 06, 2001 Jkt 089006 PO 00000 Frm 00018 Fmt 6659 Sfmt 6602 E:\HR\OC\HR184.XXX pfrm11 PsN: HR184
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ered 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. 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

20

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

21

‘‘(C) in the case of an association health plan in existence on the date of the enactment of the Bipartisan Patient Protection Act, 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), as amended by

section 142, is amended— (A) in subsection (b)(4), by striking ‘‘Subsection (a)’’ and

inserting ‘‘Subsections (a) and (e)’’;

(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

22

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 (e) as subsection (f); and

(D) by inserting after subsection (d) the following new

subsection:

‘‘(e)(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.’’.

23

(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 Bipartisan Patient Protection Act

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-IN- SURED 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, 2006, 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. Definitions and rules of construction.’’.

SEC. 422. 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

24

‘‘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. 423. 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 parVerDate 11-MAY-2000 18:28 Aug 06, 2001 Jkt 089006 PO 00000 Frm 00024 Fmt 6659 Sfmt 6602 E:\HR\OC\HR184.XXX pfrm11 PsN: HR184
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ticipating 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 Bipartisan Patient Protection Act

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.

26

‘‘(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 Bipartisan Patient Protection Act; 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. 424. ENFORCEMENT PROVISIONS RELATING TO ASSOCIATION

HEALTH PLANS.

(a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL MISREPRESENTA- TIONS.—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), as amended by sections 141 and 143, is further

amended by adding at the end the following new subsection:

‘‘(p) ASSOCIATION HEALTH PLAN CEASE AND DESIST ORDERS.—

‘‘(1) IN GENERAL.—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

27

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) EXCEPTION.—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) ADDITIONAL EQUITABLE RELIEF.—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), as amended by section 301(b), is amended by

adding at the end the following new subsection:

‘‘(c) 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. 425. 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:

‘‘(c) CONSULTATION WITH STATES WITH RESPECT TO ASSOCIATION

HEALTH PLANS.—

‘‘(1) AGREEMENTS WITH STATES.—The Secretary shall consult

with the State recognized under paragraph (2) with respect to

an association health plan regarding the exercise of—

‘‘(A) the Secretary’s authority under sections 502 and

504 to enforce the requirements for certification under part

8; and

‘‘(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.

‘‘(2) RECOGNITION OF PRIMARY DOMICILE STATE.—In carrying

out paragraph (1), the Secretary shall ensure that only one

State will be recognized, with respect to any particular association health plan, as the State to with which consultation is required. 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.’’.

28

SEC. 426. EFFECTIVE DATE AND TRANSITIONAL AND OTHER RULES.

(a) EFFECTIVE DATE.—The amendments made by sections 421,

424, and 425 shall take effect one year from the date of enactment.

The amendments made by sections 422 and 423 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 within one year from the date of enactment. 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 421) 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 812(a)(5) of the Employee

Retirement Income Security Act of 1974 (as amended by this

subtitle)) 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.

29

(2) DEFINITIONS.—For purposes of this subsection, the terms ‘‘group health plan’’, ‘‘medical care’’, and ‘‘participating employer’’ shall have the meanings provided in section 812 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.

Amend section 511 to read as follows (and conform the table of

contents accordingly):

SEC. 511. EXPANSION OF AVAILABILITY OF ARCHER MEDICAL SAVINGS ACCOUNTS.

(a) REPEAL OF LIMITATIONS ON NUMBER OF MEDICAL SAVINGS AC- COUNTS.—

(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) AVAILABILITY NOT LIMITED TO ACCOUNTS FOR EMPLOYEES OF

SMALL EMPLOYERS AND SELF-EMPLOYED INDIVIDUALS.— (1) IN GENERAL.—Subparagraph (A) of section 220(c)(1) of

such Code (relating to eligible individual) is amended to read

as follows: ‘‘(A) IN GENERAL.—The term ‘eligible individual’ means,

with respect to any month, any individual if—

‘‘(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and

‘‘(ii) such individual is not, while covered under a

high deductible health plan, covered under any health

plan—

‘‘(I) which is not a high deductible health plan,

and

‘‘(II) which provides coverage for any benefit

which is covered under the high deductible health

plan.’’.

(2) CONFORMING AMENDMENTS.—

(A) Section 220(c)(1) of such Code is amended by striking

subparagraph (C).

(B) Section 220(c) of such Code is amended by striking

paragraph (4) (defining small employer) and by redesignating paragraph (5) as paragraph (4).

(C) Section 220(b) of such Code is amended by striking

paragraph (4) (relating to deduction limited by compensation) and by redesignating paragraphs (5), (6), and (7) as

paragraphs (4), (5), and (6), respectively.

(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.’’.

30

(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 (4) of section 220(b) of such

Code (as redesignated by subsection (b)(2)(C)) is amended to read

as follows:

‘‘(4) 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) REDUCTION OF PERMITTED DEDUCTIBLES UNDER HIGH DEDUCTIBLE HEALTH PLANS.—

(1) IN GENERAL.—Subparagraph (A) of section 220(c)(2) of

such Code (defining high deductible health plan) is amended—

(A) by striking ‘‘$1,500’’ in clause (i) and inserting

‘‘$1,000’’; and

(B) by striking ‘‘$3,000’’ in clause (ii) and inserting

‘‘$2,000’’.

(2) CONFORMING AMENDMENT.—Subsection (g) of section 220

of such Code is amended to read as follows:

‘‘(g) COST-OF-LIVING ADJUSTMENT.—

‘‘(1) IN GENERAL.—In the case of any taxable year beginning

in a calendar year after 1998, each dollar amount in subsection

(c)(2) 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 such taxable

year begins by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof.

‘‘(2) SPECIAL RULES.—In the case of the $1,000 amount in

subsection (c)(2)(A)(i) and the $2,000 amount in subsection

(c)(2)(A)(ii), paragraph (1)(B) shall be applied by substituting

‘calendar year 2000’ for ‘calendar year 1997’.

‘‘(3) ROUNDING.—If any increase under paragraph (1) or (2)

is not a multiple of $50, such increase shall be rounded to the

nearest multiple of $50.’’.

(f) PROVIDING INCENTIVES FOR PREFERRED PROVIDER ORGANIZATIONS TO OFFER MEDICAL SAVINGS ACCOUNTS.—

(1) PREVENTIVE CARE COVERAGE PERMITTED.—Clause (ii) of

section 220(c)(2)(B) of such Code is amended by striking ‘‘preventive care if’’ and all that follows and inserting ‘‘preventive

care.’’

(2) TREATMENT OF NETWORK SERVICES.—Subparagraph (B) of

section 220(c)(2) of such Code is amended by adding at the end

the following new clause:

‘‘(iii) TREATMENT OF NETWORK SERVICES.—In the

case of a health plan which provides benefits for services provided by providers in a network (as defined in

section 161 of the Patient’s Bill of Rights Act of 2001)

and which would (without regard to services provided

by providers outside the network) be a high deductible

31

health plan, such plan shall not fail to be a high deductible health plan because—

‘‘(I) the annual deductible for services provided

by providers outside the network exceeds the applicable maximum dollar amount in clause (i) or

(ii), or

‘‘(II) the annual out-of-pocket expenses required

to be paid for services provided by providers outside the network exceeds the applicable dollar

amount in clause (iii).

The annual deductible taken into account under subsection (b)(2) with respect to a plan to which the preceding sentence applies shall be the annual deductible

for services provided by providers within the network.’’

(g) MEDICAL SAVINGS ACCOUNTS MAY BE OFFERED UNDER CAFETERIA PLANS.—Subsection (f) of section 125 of such Code is amended by striking ‘‘106(b),’’.

(h) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2001.

2. AN AMENDMENT TO BE OFFERED BY REPRESENTATIVE NORWOOD

OF GEORGIA, OR A DESIGNEE, DEBATABLE FOR 60 MINUTES

Amend section 402 to read as follows:

SEC. 402. AVAILABILITY OF CIVIL REMEDIES.

(a) IN GENERAL.—Section 502 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132) is amended by adding

at the end the following: ‘‘(n) CAUSE OF ACTION RELATING TO CLAIMS FOR HEALTH BENEFITS.—

‘‘(1) CAUSE OF ACTION.—

‘‘(A) IN GENERAL.—With respect to an action commenced

by a participant or beneficiary (or the estate of the participant or beneficiary) in connection with a claim for benefits

under a group health plan, if—

‘‘(i) a designated decisionmaker described in paragraph (2) fails to exercise ordinary care—

‘‘(I) in making a determination denying the

claim for benefits under section 503A (relating to

an initial claim for benefits),

‘‘(II) in making a determination denying the

claim for benefits under section 503B (relating to

an internal appeal), or

‘‘(III) in failing to authorize coverage in compliance with the written determination of an independent medical reviewer under section

503C(d)(3)(F) that reverses a determination denying the claim for benefits, and

‘‘(ii) the delay in receiving, or failure to receive, benefits attributable to the failure described in clause (i)

is the proximate cause of personal injury to, or death

of, the participant or beneficiary,

such designated decisionmaker shall be liable to the participant or beneficiary (or the estate) for economic and nonVerDate 11-MAY-2000 18:28 Aug 06, 2001 Jkt 089006 PO 00000 Frm 00031 Fmt 6659 Sfmt 6602 E:\HR\OC\HR184.XXX pfrm11 PsN: HR184
32

economic damages in connection with such failure and

such injury or death (subject to paragraph (4)).

‘‘(B) REBUTTABLE PRESUMPTION.—In the case of a cause

of action under subparagraph (A)(i)(I) or (A)(i)(II), if an

independent medical reviewer under section 503C(d) or

503C(e)(4)(B) upholds the determination denying the claim

for benefits involved, there shall be a presumption (rebuttable by clear and convincing evidence) that the designated

decisionmaker exercised ordinary care in making such determination.

‘‘(2) DESIGNATED DECISIONMAKER.—

‘‘(A) APPOINTMENT.—

‘‘(i) IN GENERAL.—The plan sponsor or named fiduciary of a group health plan shall, in accordance with

this paragraph with respect to a participant or beneficiary, designate a person that meets the requirements of subparagraph (B) to serve as a designated

decisionmaker with respect to the cause of action described in paragraph (1), except that—

‘‘(I) with respect to health insurance coverage

offered in connection with a group health plan,

the health insurance issuer shall be the designated decisionmaker unless the plan sponsor

and the issuer specifically agree in writing (on a

form to be prescribed by the Secretary) to substitute another person as the designated decisionmaker; or

‘‘(II) with respect to the designation of a person

other than a plan sponsor or health insurance

issuer, such person shall satisfy the requirements

of subparagraph (D).

‘‘(ii) PLAN DOCUMENTS.—The designated decisionmaker shall be specifically designated as such in the

written instruments of the plan (under section 402(a))

and be identified as required under section 121(b)(15)

of the Bipartisan Patient Protection Act.

‘‘(B) REQUIREMENTS.—For purposes of this paragraph, a

designated decisionmaker meets the requirements of this

subparagraph with respect to any participant or beneficiary if—

‘‘(i) such designation is in such form as may be specified in regulations prescribed by the Secretary,

‘‘(ii) the designated decisionmaker—

‘‘(I) meets the requirements of subparagraph

(C),

‘‘(II) assumes unconditionally all liability arising

under this subsection in connection with actions

and failures to act described in subparagraph (A)

(whether undertaken by the designated decisionmaker or the employer, plan, plan sponsor, or employee or agent thereof) during the period in

which the designation under this paragraph is in

effect relating to such participant or beneficiary,

and

33

‘‘(III) where subparagraph (C)(ii) applies, assumes unconditionally the exclusive authority

under the group health plan to make determinations on claims for benefits (irrespective of whether they constitute medically reviewable determinations) under the plan with respect to such participant or beneficiary, and

‘‘(iii) the designated decisionmaker and the participants and beneficiaries for whom the decisionmaker

has assumed liability are identified in the written instrument required under section 402(a) and as required under section 121(b)(15) of the Bipartisan Patient Protection Act.

Any liability assumed by a designated decisionmaker pursuant to this paragraph shall be in addition to any liability

that it may otherwise have under applicable law.

‘‘(C) QUALIFICATIONS FOR DESIGNATED DECISIONMAKERS.—

‘‘(i) IN GENERAL.—Subject to clause (ii), an entity is

qualified under this subparagraph to serve as a designated decisionmaker with respect to a group health

plan if the entity has the ability to assume the liability described in subparagraph (A) with respect to participants and beneficiaries under such plan, including

requirements relating to the financial obligation for

timely satisfying the assumed liability, and maintains

with the plan sponsor certification of such ability.

Such certification shall be provided to the plan sponsor or named fiduciary upon designation under this

paragraph and not less frequently than annually

thereafter, or if such designation constitutes a

multiyear arrangement, in conjunction with the renewal of the arrangement.

‘‘(ii) SPECIAL QUALIFICATION IN THE CASE OF CERTAIN

REVIEWABLE DECISIONS.—In the case of a group health

plan that provides benefits consisting of medical care

to a participant or beneficiary only through health insurance coverage offered by a health insurance issuer,

such issuer is the only entity that may be qualified

under this subparagraph to serve as a designated decisionmaker with respect to such participant or beneficiary, and shall serve as the designated decisionmaker unless the employer or other plan sponsor acts

affirmatively to prevent such service.

‘‘(D) REQUIREMENTS RELATING TO FINANCIAL OBLIGATIONS.—For purposes of subparagraphs (A)(i)(II) and (C)(i),

the requirements relating to the financial obligation of an

entity for liability shall include—

‘‘(i) coverage of such entity under an insurance policy or other arrangement, secured and maintained by

such entity, to effectively insure such entity against

losses arising from professional liability claims, including those arising from its service as a designated decisionmaker under this subsection; or

34

‘‘(ii) evidence of minimum capital and surplus levels

that are maintained by such entity to cover any losses

as a result of liability arising from its service as a designated decisionmaker under this subsection.

The appropriate amounts of liability insurance and minimum capital and surplus levels for purposes of clauses (i)

and (ii) shall be determined by an actuary using sound actuarial principles and accounting practices pursuant to established guidelines of the American Academy of Actuaries

and in accordance with such regulations as the Secretary

may prescribe and shall be maintained throughout the

term for which the designation is in effect. The provisions

of this subparagraph shall not apply in the case of a designated decisionmaker that is a group health plan, plan

sponsor, or health insurance issuer and that is regulated

under Federal law or a State financial solvency law.

‘‘(E) LIMITATION ON APPOINTMENT OF TREATING PHYSICIANS.—A treating physician who directly delivered the

care or treatment or provided services which is the subject

of a cause of action by a participant or beneficiary under

paragraph (1) may not be appointed (or deemed to be appointed) as a designated decisionmaker under this paragraph with respect to such participant or beneficiary.

‘‘(F) FAILURE TO APPOINT.—With respect to any cause of

action under paragraph (1) relating to a denial of a claim

for benefits where a designated decisionmaker has not

been appointed in accordance with this paragraph, the

plan sponsor or named fiduciary responsible for determinations under section 503 shall be deemed to be the designated decisionmaker.

‘‘(G) EFFECT OF APPOINTMENT.—The appointment of a

designated decisionmaker in accordance with this paragraph shall not affect the liability of the appointing plan

sponsor or named fiduciary for the failure of the plan sponsor or named fiduciary to comply with any other requirement of this title.

‘‘(H) TREATMENT OF CERTAIN TRUST FUNDS.—For purposes of this subsection, the terms ‘employer’ and ‘plan

sponsor’, in connection with the assumption by a designated decisionmaker of the liability of employer or other

plan sponsor pursuant to this paragraph, shall be construed to include a trust fund maintained pursuant to section 302 of the Labor Management Relations Act, 1947 (29

U.S.C. 186) or the Railway Labor Act (45 U.S.C. 151 et

seq.).

‘‘(3) REQUIREMENT OF EXHAUSTION OF INDEPENDENT MEDICAL

REVIEW.—

‘‘(A) IN GENERAL.—Paragraph (1) shall apply only if—

‘‘(i) a final determination denying a claim for benefits under section 503B has been referred for independent medical review under section 503C(d) and a

written determination by an independent medical reviewer has been issued with respect to such review, or

35

‘‘(ii) the qualified external review entity has determined under section 503C(c)(3) that a referral to an

independent medical reviewer is not required. ‘‘(B) INJUNCTIVE RELIEF FOR IRREPARABLE HARM.—A participant or beneficiary may seek relief under subsection

(a)(1)(B) prior to the exhaustion of administrative remedies

under section 503B or 503C (as required under subparagraph (A)) if it is demonstrated to the court, by a preponderance of the evidence, that the exhaustion of such remedies would cause irreparable harm to the health of the

participant or beneficiary. Any determinations that already have been made under section 503A, 503B, or 503C

in such case, or that are made in such case while an action

under this subparagraph is pending, shall be given due

consideration by the court in any action under subsection

(a)(1)(B) in such case. Notwithstanding the awarding of

such relief under subsection (a)(1)(B) pursuant to this subparagraph, no relief shall be available under paragraph

(1), with respect to a participant or beneficiary, unless the

requirements of subparagraph (A) are met. ‘‘(C) RECEIPT OF BENEFITS DURING APPEALS PROCESS.— Receipt by the participant or beneficiary of the benefits involved in the claim for benefits during the pendency of any

administrative processes referred to in subparagraph (A)

or of any action commenced under this subsection— ‘‘(i) shall not preclude continuation of all such administrative processes to their conclusion if so moved

by any party, and ‘‘(ii) shall not preclude any liability under subsection

(a)(1)(C) and this subsection in connection with such

claim.

The court in any action commenced under this subsection

shall take into account any receipt of benefits during such

administrative processes or such action in determining the

amount of the damages awarded.

‘‘(4) LIMITATIONS ON RECOVERY OF DAMAGES.— ‘‘(A) MAXIMUM AWARD OF NONECONOMIC DAMAGES.—The

aggregate amount of liability for noneconomic loss in an

action under paragraph (1) may not exceed $1,500,000. ‘‘(B) LIMITATION ON AWARD OF PUNITIVE DAMAGES.—In

the case of any action commenced pursuant to paragraph

(1), the court may not award any punitive, exemplary, or

similar damages against a defendant, except that the court

may award punitive, exemplary, or similar damages (in

addition to damages described in subparagraph (A)), in an

aggregate amount not to exceed $1,500,000, if—

‘‘(i) the denial of a claim for benefits involved in the

case was reversed by a written determination by an

independent medical reviewer under section

503C(d)(3)(F); and ‘‘(ii) there has been a failure to authorize coverage

in compliance with such written determination. ‘‘(C) PERMITTING APPLICATION OF LOWER STATE DAMAGE

LIMITS.—A State may limit damages for noneconomic loss

or punitive, exemplary, or similar damages in an action

36

under paragraph (1) to amounts less than the amounts

permitted under this paragraph. ‘‘(5) ADMISSIBILITY.—In an action described in subclause (I)

or (II) of paragraph (1)(A) relating to a denial of a claim for

benefits, any determination by an independent medical reviewer under section 503C(d) or 503C(e)(4)(B) relating to such

denial is admissible. ‘‘(6) WAIVER OF INTERNAL REVIEW.—In the case of any cause

of action under paragraph (1), the waiver or nonwaiver of internal review under section 503B(a)(4) by the group health

plan, or health insurance issuer that offers health insurance

coverage in connection with a group health plan, shall not be

used in determining liability. ‘‘(7) LIMITATIONS ON ACTIONS.—Paragraph (1) shall not apply

in connection with any action that is commenced more than 5

years after the date on which the failure described in such

paragraph occurred or, if earlier, not later than 2 years after

the first date the participant or beneficiary became aware of

the personal injury or death referred to in such paragraph. ‘‘(8) EXCLUSION OF DIRECTED RECORDKEEPERS.— ‘‘(A) IN GENERAL.—Paragraph (1) shall not apply with respect to a directed record keeper in connection with a

group health plan. ‘‘(B) DIRECTED RECORDKEEPER.—For purposes of this

paragraph, the term ‘directed recordkeeper’ means, in connection with a group health plan, a person engaged in directed recordkeeping activities pursuant to the specific instructions of the plan, the employer, or another plan sponsor, including the distribution of enrollment information

and distribution of disclosure materials under this Act or

title I of the Bipartisan Patient Protection Act and whose

duties do not include making determinations on claims for

benefits. ‘‘(C) LIMITATION.—Subparagraph (A) does not apply in

connection with any directed recordkeeper to the extent

that the directed recordkeeper fails to follow the specific

instruction of the plan or the employer or other plan sponsor.

‘‘(9) PROTECTION OF THE REGULATION OF QUALITY OF MEDICAL

CARE UNDER STATE LAW.—Nothing in this subsection shall be

construed to preclude any action under State law against a

person or entity for liability or vicarious liability with respect

to the delivery of medical care. A cause of action that is based

on or otherwise relates to a group health plan’s determination

on a claim for benefits shall not be deemed to be the delivery

of medical care under any State law for purposes of this paragraph. Any such cause of action shall be maintained exclusively under this section. Nothing in this paragraph shall be

construed to alter, amend, modify, invalidate, impair, or supersede section 514. ‘‘(10) COORDINATION WITH FIDUCIARY REQUIREMENTS.—A fiduciary shall not be treated as failing to meet any requirement

of part 4 solely by reason of any action taken by a fiduciary

which consists of full compliance with the reversal under section 503C (relating to independent external appeals procedures

37

for group health plans) of a denial of claim for benefits (within

the meaning of section 503C(i)(2)).

‘‘(11) CONSTRUCTION.—Nothing in this subsection shall be

construed as authorizing a cause of action under paragraph (1)

for the failure of a group health plan or health insurance

issuer to provide an item or service that is specifically excluded

under the plan or coverage.

‘‘(12) LIMITATION ON CLASS ACTION LITIGATION.—A claim or

cause of action under this subsection may not be maintained

as a class action, as a derivative action, or as an action on behalf of any group of 2 or more claimants.

‘‘(13) PURCHASE OF INSURANCE TO COVER LIABILITY.—Nothing

in section 410 shall be construed to preclude the purchase by

a group health plan of insurance to cover any liability or losses

arising under a cause of action under subsection (a)(1)(C) and

this subsection.

‘‘(14) RETROSPECTIVE CLAIMS FOR BENEFITS.—A cause of action shall not arise under paragraph (1) where the claim for

benefits relates to an item or service that has already been

provided to the participant or beneficiary under the plan or

coverage and the claim relates solely to the subsequent denial

of payment for the provision of such item or service.

‘‘(15) EXEMPTION FROM PERSONAL LIABILITY FOR INDIVIDUAL

MEMBERS OF BOARDS OF DIRECTORS, JOINT BOARDS OF TRUSTEES, ETC.—Any individual who is—

‘‘(A) a member of a board of directors of an employer or

plan sponsor; or

‘‘(B) a member of an association, committee, employee

organization, joint board of trustees, or other similar group

of representatives of the entities that are the plan sponsor

of plan maintained by two or more employers and one or

more employee organizations;

shall not be personally liable under this subsection for conduct

that is within the scope of employment or of plan-related duties of the individuals unless the individual acts in a fraudulent manner for personal enrichment.

‘‘(16) DEFINITIONS AND RELATED RULES.—For purposes of this

subsection:

‘‘(A) CLAIM FOR BENEFITS.—The term ‘claim for benefits’

shall have the meaning given such term in section 503A(e).

‘‘(B) GROUP HEALTH PLAN.—The term ‘group health plan’

shall have the meaning given such term in section 733(a).

‘‘(C) HEALTH INSURANCE COVERAGE.—The term ‘health

insurance coverage’ has the meaning given such term in

section 733(b)(1).

‘‘(D) HEALTH INSURANCE ISSUER.—The term ‘health insurance issuer’ has the meaning given such term in section

733(b)(2).

‘‘(E) ORDINARY CARE.—The term ‘ordinary care’ means,

with respect to a determination on a claim for benefits,

that degree of care, skill, and diligence that a reasonable

and prudent individual would exercise in making a fair determination on a claim for benefits of like kind to the

claims involved.

38

‘‘(F) PERSONAL INJURY.—The term ‘personal injury’ means a physical injury and includes an injury arising out

of the treatment (or failure to treat) a mental illness or

disease. ‘‘(G) TREATMENT OF EXCEPTED BENEFITS.—The provisions

of this subsection (and subsection (a)(1)(C)) shall not apply

to excepted benefits (as defined in section 733(c)), other

than benefits described in section 733(c)(2)(A), in the same

manner as the provisions of part 7 do not apply to such

benefits under subsections (b) and (c) of section 732.

(2) CONFORMING AMENDMENT.—Section 502(a)(1) of such Act

(29 U.S.C. 1132(a)(1)) is amended— (A) by striking ‘‘or’’ at the end of subparagraph (A);

(B) in subparagraph (B), by striking ‘‘plan;’’ and inserting ‘‘plan, or’’; and

(C) by adding at the end the following new subparagraph: ‘‘(C) for the relief provided for in subsection (n) of this

section.’’. (b) AVAILABILITY OF ACTIONS IN STATE COURT.— (1) JURISDICTION OF STATE COURTS.—Section 502(e)(1) of

such Act (29 U.S.C. 1132(e)) is amended— (A) in the first sentence, by striking ‘‘subsection

(a)(1)(B)’’ and inserting ‘‘paragraphs (1)(B), (1)(C), and (7)

of subsection (a)’’;

(B) in the second sentence, by striking ‘‘paragraphs

(1)(B) and (7)’’ and inserting ‘‘paragraphs (1)(B), (1)(C), and

(7)’’; and

(C) by adding at the end the following new sentence: ‘‘State courts of competent jurisdiction in the State in

which the plaintiff resides and district courts of the United

States shall have concurrent jurisdiction over actions

under subsections (a)(1)(C) and (n).’’. (2) LIMITATION ON REMOVABILITY OF CERTAIN ACTIONS IN

STATE COURT.—Section 1445 of title 28, United States Code, is

amended by adding at the end the following new subsection: ‘‘(e)(1) A civil action brought in any State court under subsections

(a)(1)(C) and (n) of section 502 of the Employee Retirement Income

Security Act of 1974 against any party (other than the employer,

plan, plan sponsor, or other entity treated under section 502(n) of

such Act as such) arising from a medically reviewable determination may not be removed to any district court of the United States.

‘‘(2) For purposes of paragraph (1), the term ‘medically reviewable decision’ means a denial of a claim for benefits under the plan

which is described in section 503C(d)(2) of the Employee Retirement Income Security Act of 1974.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to acts and omissions, from which a cause of action

arises, occurring on or after the applicable effective date under section 601.

Amend section 403 to read as follows:

SEC. 403. LIMITATION ON CERTAIN CLASS ACTION LITIGATION.

(a) IN GENERAL.—Section 502 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132), as amended by section

402, is further amended by adding at the end the following:

39

‘‘(o) LIMITATION ON CLASS ACTION LITIGATION.—Any claim or

cause of action that is maintained under this section (other than

under subsection (n)) or under section 1962 or 1964(c) of title 18,

United States Code, in connection with a group health plan, or

health insurance coverage issued in connection with a group health

plan, as a class action, derivative action, or as an action on behalf

of any group of 2 or more claimants, may be maintained only if the

class, the derivative claimant, or the group of claimants is limited

to the participants or beneficiaries of a group health plan established by only 1 plan sponsor. No action maintained by such class,

such derivative claimant, or such group of claimants may be joined

in the same proceeding with any action maintained by another

class, derivative claimant, or group of claimants or consolidated for

any purpose with any other proceeding. In this paragraph, the

terms ‘group health plan’ and ‘health insurance coverage’ have the

meanings given such terms in section 733.’’. (b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply with respect to actions commenced on or after August

2, 2001. Notwithstanding the preceding sentence, with respect to

class actions, the amendment made by subsection (a) shall apply

with respect to civil actions which are pending on such date in

which a class action has not been certified as of such date.

Amend section 603 to read as follows:

SEC. 603. SEVERABILITY.

(a) IN GENERAL.—Except as provided in subsections (b) and (c),

if any provision of this Act, an amendment made by this Act, or

the application of such provision or amendment to any person or

circumstance is held to be unconstitutional, the remainder of this

Act, the amendments made by this Act, and the application of the

provisions of such to any person or circumstance shall not be affected thereby.

(b) DEPENDENCE OF REMEDIES ON APPEALS.—If any provision of

section 503A, 503B, or 503C of the Employee Retirement Income

Security Act of 1974 (as inserted by section 131) or the application

of either such section to any person or circumstance is held to be

unconstitutional, section 502(n) of such Act (as inserted by section

402) shall be deemed to be null and void and shall be given no

force or effect.

(c) REMEDIES.—If any provision of section 502(n) of the Employee

Retirement Income Security Act of 1974 (as inserted by section

402), or the application of such section to any person or circumstance, is held to be unconstitutional, the remainder of such

section shall be deemed to be null and void and shall be given no

force or effect.

Page 16, line 10, strike ‘‘on a timely basis’’ and insert ‘‘in accordance with the applicable deadlines established under this section

and section 503B’’. Page 29, line 14, strike ‘‘or modify’’.

Page 36, line 12, strike ‘‘upheld, reversed, or modified’’ and insert

‘‘upheld or reversed’’.

Page 39, line 23, strike ‘‘uphold, reverse, or modify’’ and insert

‘‘uphold or reverse’’.

Page 40, line 8, and page 44, line 9, strike ‘‘or modify’’.

Page 23, line 18; page 41, line 19; page 43, line 2; , , strike ‘‘reviewer (or reviewers)’’ and insert ‘‘a review panel’’.

40

Page 33, line 7, strike ‘‘reviewer’’ and insert ‘‘review panel’’.

Page 34, line 25, strike ‘‘reviewer’’ and insert ‘‘review panel composed of 3 independent medical reviewers’’.

Page 34, lines 8 and 13; page 36, line 8; page 37, line 3; page

38, lines 6 and 20; page 39, line 4, 20, and 21; page 40, lines 1,

2 and 14; page 41, line 6; page 43, lines 6, 17, and 20; page 44,

lines 5, 9, and 14; page 45, line 24; page 61, line 5; page 67, line

3; page 68, line 25; , strike ‘‘reviewer’’ and insert ‘‘review panel’’.

Page 36, line 14; page 43, line 21; page 44, line 12; , strike ‘‘reviewer’s’’ and insert ‘‘review panel’s’’.

Page 41, line 4, strike ‘‘reviewer (or reviewers)’’ and insert ‘‘review panel’’.

Page 47, line 15, strike ‘‘independent external reviewer’’ and insert ‘‘independent medical review panel’’.

Page 50, line 20, strike ‘‘1 or more individuals’’ and insert ‘‘an

independent medical review panel’’.

Page 51, amend lines 4 through 6 to read as follows:

‘‘(B) with respect to each review, the review panel meets

the requirements of paragraph (4) and at least 1 reviewer

on the panel meets the requirements described in paragraph (5); and

Page 51, line 8, strike ‘‘the reviewer’’ and insert ‘‘each reviewer’’.

Page 53, line 21, strike ‘‘a reviewer’’ and insert ‘‘each reviewer’’.

Page 54, line 6, strike ‘‘a reviewer (or reviewers)’’ and insert ‘‘the

independent medical review panel’’.

Page 61, line 5, insert ‘‘or any independent medical review panel’’

after ‘‘reviewer’’.

Page 64, lines 1 and 5, strike ‘‘reviewers’’ and insert ‘‘review

panel’’.

Page 64, line 14; page 69, lines 16 and 19, strike ‘‘reviewers’’ and

insert ‘‘review panels’’.

Page 8, after line 17, insert the following (and place the text from

page 8, line 18, through page 16, line 20 in quotation marks):

Part 5 of subtitle B of title I of the Employee Retirement Income

Security Act of 1974 is amended by inserting after section 503 (29

U.S.C. 1133) the following:

‘‘SEC. 503A. PROCEDURES FOR INITIAL CLAIMS FOR BENEFITS AND

PRIOR AUTHORIZATION DETERMINATIONS.

Page 16, after line 21, insert the following (and place the text

from page 16, line 22, through page 25, line 13 in quotation

marks):

Part 5 of subtitle B of title I of the Employee Retirement Income

Security Act of 1974 (as amended by section 102) is amended further by inserting after section 503A (29 U.S.C. 1133) the following:

‘‘SEC. 503B. INTERNAL APPEALS OF CLAIMS DENIALS.

Page 25, after line 15, insert the following (and place the text

from page 25, line 16, through page 69, line 22 in quotation

marks):

Part 5 of subtitle B of title I of the Employee Retirement Income

Security Act of 1974 (as amended by sections 102 and 103) is

amended further by inserting after section 503B (29 U.S.C. 1133)

the following:

41

‘‘SEC. 503C. INDEPENDENT EXTERNAL APPEALS PROCEDURES.

Page 119, line 1, insert after ‘‘treatment.’’ the following: ‘‘The

name of the designated decisionmaker (or decisionmakers) appointed under paragraph (2) of section 502(n) of the Employee Retirement Income Security Act of 1974 for purposes of such section.’’.

Page 138, line 21, insert after ‘‘plan’’ the following: ‘‘and only

with respect to patient protection requirements under section 101

and subtitles B, C, and D and this subtitle’’.

Page 145, line 12, strike ‘‘and the provisions of sections

502(a)(1)(C), 502(n), and 514(d) of the Employee Retirement Income

Security Act of 1974 (added by section 402)’’. Page 148, line 15, after ‘‘Act’’ insert the following: ‘‘and sections

503A through 503C of the Employee Retirement Income Security

Act of 1974’’. Page 149, line 9, after ‘‘Act’’ insert the following: ‘‘and sections

503A through 503C of the Employee Retirement Income Security

Act of 1974 (with respect to enrollees under individual health insurance coverage in the same manner as they apply to participants

and beneficiaries under group health insurance coverage)’’.

Page 152, line 16, insert ‘‘section 101 and subtitles B, C, D, and

E of’’ before ‘‘title I’’.

Page 155, strike lines 1 through 19 (and redesignate the subsequent paragraphs accordingly).

Page 158, strike lines 19 through 25 and insert the following:

‘‘(b)(1)(A) Subject to subparagraphs (B) and (C), a group health

plan (and a health insurance issuer offering group health insurance

coverage in connection with such a plan) shall comply with the requirements of sections 503A, 503B, and 503C, and such requirements shall be deemed to be incorporated into this subsection.

‘‘(B) With respect to the internal appeals process required to be

established under section 503B, in the case of a group health plan

that provides benefits in the form of health insurance coverage

through a health insurance issuer, the Secretary shall determine

the circumstances under which the plan is not required to provide

for such process and system (and is not liable for the issuer’s failure to provide for such process and system), if the issuer is obligated to provide for (and provides for) such process and system. ‘‘(C) Pursuant to rules of the Secretary, insofar as a group health

plan enters into a contract with a qualified external review entity

for the conduct of external appeal activities in accordance with section 503C, the plan shall be treated as meeting the requirement of

such section and is not liable for the entity’s failure to meet any

requirements under such section. ‘‘(2) In the case of a group health plan, compliance with the requirements of sections 503A, 503B, and 503C, and compliance with

regulations promulgated by the Secretary, in connection with a denial of a claim under a group health plan shall be deemed compliance with subsection (a) with respect to such claim denial. ‘‘(3) Terms used in this subsection which are defined in section

733 shall have the meanings provided such terms in such section.’’. Page 210, line 19, after ‘‘Act’’ insert the following: ‘‘and sections

503A through 503C of the Employee Retirement Income Security

Act of 1974’’.

Make such additional technical and conforming changes to the

text of the bill as are necessary to do the following:

42

(1) Replace references to sections 102, 103, and 104 of the

bill with references to sections 503A, 503B, and 503C of the

Employee Retirement Income Security Act of 1974, as amended

by the bill.

(2) In sections 102, 103, and 104, strike any reference to ‘‘enrollee’’ or ‘‘enrollees’’ and insert ‘‘in connection with the group

health plan’’ after ‘‘health insurance coverage’’, and make necessary conforming grammatical changes.

3. AN AMENDMENT TO BE OFFERED BY REPRESENTATIVE THOMAS OF

CALIFORNIA, OR REPRESENTATIVE SENSENBRENNER OF WISCONSIN,

OR A DESIGNEE, DEBATABLE FOR 40 MINUTES

Add at the end the following new title (and amend the table of

contents of the bill accordingly):

TITLE VIII—REFORMS RELATING TO

HEALTH CARE LIABILITY CLAIMS

SEC. 801. TABLE OF CONTENTS OF TITLE.

The table of contents of this title is as follows:

Sec. 801. Table of contents of title.

Sec. 802. Application in States.

Sec. 803. Encouraging speedy resolution of claims.

Sec. 804. Compensating patient injury; fair share rule.

Sec. 805. Authorization of payment of future damages to claimants in health care

lawsuits.

Sec. 806. No punitive damages for health care products that comply with FDA

standards.

Sec. 807. Effect on other laws.

Sec. 808. Definitions.

Sec. 809. Effective date; general provisions.

SEC. 802. APPLICATION IN STATES.

The provisions of this title relating to any requirement or rule

shall not apply with respect to a health care lawsuit brought under

State law insofar as the applicable statutory law of that State with

respect to such lawsuit specifies another policy with respect to such

requirement or rule.

SEC. 803. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS.

Health care lawsuits shall be commenced no later than 2 years

after the claimant discovers, or through the use of reasonable diligence should have discovered, the injury for which the lawsuit was

brought. In all cases, a health care lawsuit shall be filed no later

than 5 years after the date of the injury. The time periods for filing

health care lawsuits established in this section shall not apply in

cases of malicious intent to injure. To the extent that chapter 171

of title 28, United States Code, relating to tort procedure, and, subject to section 802, State law (with respect to both procedural and

substantive matters), establishes a longer period during which a

health care lawsuit may be initiated than is authorized in this section, such chapter or law is superceded or preempted.

SEC. 804. COMPENSATING PATIENT INJURY; FAIR SHARE RULE.

(a) UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL LOSSES IN

HEALTH CARE LAWSUITS.—In any health care lawsuit, the full

43

amount of a claimant’s economic loss may be fully recovered, subject to section 809(d)(2), without limitation.

(b) ADDITIONAL NON-ECONOMIC DAMAGES.—Subject to section

809(d)(2), in any health care lawsuit, the amount of non-economic

damages may be as much as $250,000, regardless of the number

of parties against whom the action is brought or the number of separate claims or actions brought with respect to the same occurrence.

(c) NO DISCOUNT OF AWARD FOR NON-ECONOMIC DAMAGES.—In

any health care lawsuit, an award for future non-economic damages shall not be discounted to present value. The jury shall not

be informed of the maximum award for non-economic damages. An

award for non-economic damages in excess of the amount specified

in subsection (b) (or the amount provided under section 809(d)(2),

if applicable) shall be reduced either before the entry of judgment,

or by amendment of the judgment after entry, and such reduction

shall be made before accounting for any other reduction in damages

required by law. If separate awards are rendered for past and future non-economic damages and the combined awards exceed the

amount so specified, the future non-economic damages shall be reduced first.

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

shall be liable for the party’s several share of any damages only

and not for the share of any other person. Each party shall be liable only for the amount of damages allocated to such party in direct

proportion to such party’s percentage of responsibility. A separate

judgment shall be rendered against each such party for the amount

allocated to such party. For purposes of this section, the trier of

fact shall determine the proportion of responsibility of each party

for the claimant’s harm.

(e) ADDITIONAL HEALTH BENEFITS.—In any health care lawsuit,

any party may introduce evidence of collateral source benefits. If

any party elects to introduce such evidence, the opposing party

may introduce evidence of any amount paid or contributed or reasonably likely to be paid or contributed in the future by or on behalf of such opposing party to secure the right to such collateral

source benefits. No provider of collateral source benefits shall recover any amount against the claimant or receive any lien or credit

against the claimant’s recovery or be equitably or legally subrogated to the right of the claimant in a health care lawsuit. This

subsection shall apply to a health care lawsuit that is settled as

well as a health care lawsuit that is resolved by a fact finder.

(f) TREATMENT OF PUNITIVE DAMAGES.—

(1) GENERAL RULE.—Punitive damages may, to the extent

permitted by applicable State law, be awarded in any health

care lawsuit in any Federal or State court against a defendant

if the claimant establishes by clear and convincing evidence

that the harm suffered was the result of conduct—

(A) specifically intended to cause harm; or

(B) conduct manifesting a conscious, flagrant indifference to the rights or safety of others.

(2) APPLICABILITY.—This subsection shall apply to any such

health care lawsuit on any theory where punitive damages are

sought. This subsection does not create a cause of action for

punitive damages.

44

(3) LIMITATION ON PUNITIVE DAMAGES.—The total amount of

punitive damages that may be awarded to a claimant for losses

resulting from the injury which is the subject of such a health

care lawsuit may not exceed the greater of—

(A) 2 times the amount of economic damages, or

(B) $250,000,

regardless of the number of parties against whom the action is

brought or the number of actions brought with respect to the

injury. Subject to section 802, this subsection does not preempt

or supersede any State or Federal law to the extent that such

law would further limit the award of punitive damages.

(4) BIFURCATION.—At the request of any party, the trier of

fact shall consider in a separate proceeding whether punitive

damages are to be awarded and the amount of such award. If

a separate proceeding is requested, evidence relevant only to

the claim of punitive damages, as determined by applicable

State law, shall be inadmissible in any proceeding to determine

whether actual damages are to be awarded.

(g) LIMITATIONS ON APPLICABILITY OF THIS SECTION.—This section applies only to health care lawsuits. Furthermore only to the

extent that—

(1) chapter 171 of title 28, United States Code, relating to

tort procedure, permits the recovery of a greater amount of

damages than authorized by this section, such chapter shall be

superseded by this section; and

(2) only to the extent that either chapter 171 of title 28,

United States Code, relating to tort procedure, or, subject to

section 802, State law (with respect to procedural and substantive matters), prohibits the introduction of evidence regarding collateral source benefits or mandates or permits subrogation or a lien on an award of damages for the cost of providing collateral source benefits, such chapter or law is superseded or preempted by this section.

SEC. 805. AUTHORIZATION OF PAYMENT OF FUTURE DAMAGES TO

CLAIMANTS IN HEALTH CARE LAWSUITS.

(a) IN GENERAL.—In any health care lawsuit, if an award of future damages, without reduction to present value, equaling or exceeding $50,000 is made against a party with sufficient insurance

or other assets to fund a period payment of such a judgment, the

court shall, at the request of any party, enter a judgment ordering

that the future damages be paid by periodic payments in accordance with the Uniform Periodic Payment of Judgments Act promulgated by the National Conference of Commissioners on Uniform

State Laws in July 1990. This section applies to all actions which

have not been first set for trial or retrial prior to the effective date

of this title.

(b) LIMITATION ON APPLICABILITY OF THIS SECTION.—Only to the

extent that chapter 171 of title 28, United States Code, relating to

tort procedure, or, subject to section 802, State law (with respect

to both procedural and substantive matters), reduces the applicability or scope of the regulation of periodic payment of future damages as authorized in this section, is such chapter or law preempted or superseded.

45

SEC. 806. NO PUNITIVE DAMAGES FOR HEALTH CARE PRODUCTS THAT

COMPLY WITH FDA STANDARDS.

(a) GENERAL RULE.—In the case of any health care lawsuit, no

punitive or exemplary damages may be awarded against the manufacturer of a medical product based on a claim that the medical

product caused the claimant’s harm if the medical product complies

with FDA standards.

(b) EXCEPTION.—Subsection (a) shall not apply in any health care

lawsuit in which— (1) before or after the grant of FDA permission to market a

medical product, a person knowingly misrepresents to or withholds from the FDA required information that is material and

relevant to the performance of such medical product, if such

misrepresentation or withholding of information is causally related to the harm which the claimant allegedly suffered; or

(2) a person makes an illegal payment to an official of FDA

for the purpose of either securing or maintaining approval of

such medical product.

SEC. 807. EFFECT ON OTHER LAWS.

This title does not affect the application of title XXI of the Public

Health Service Act (relating to the national vaccine program). To

the extent that this title is judged to be in conflict with such title

XXI, then this title shall not apply to an action brought under such

title. If any aspect of such a civil action is not governed by a Federal rule of law under such title, then this title or otherwise applicable law (as determined under this title) will apply to that aspect

of the action.

SEC. 808. DEFINITIONS.

As used in this title:

(1) ALTERNATIVE DISPUTE RESOLUTION.—The term ‘‘alternative dispute resolution’’ means a system that provides for the

resolution of health care lawsuits in a manner other than

through a civil action brought in a State or Federal Court.

(2) AMOUNT RECOVERED BY CLAIMANTS.—The term ‘‘amount

recovered by claimants’’ means the total amount of damages

awarded to a party, after taking into account any reduction in

damages required by this title or applicable law, and after deducting any disbursements or costs incurred in connection with

prosecution or settlement of a claim, including all costs paid or

advanced by any person. Costs of health care incurred by the

plaintiff and the attorneys’ office overhead costs or charges for

legal services are not deductible disbursements or costs for

such purpose. Such term does not include any punitive or exemplary damages.

(3) CLAIMANT.—The term ‘‘claimant’’ means any person who

asserts a health care liability claim or brings a health care

lawsuit, including a person who asserts or claims a right to

legal or equitable contribution, indemnity, or subrogation, arising out of a health care lawsuit, and any person on whose behalf such a claim is asserted or such an action is brought,

whether deceased, incompetent, or a minor.

(4) COLLATERAL SOURCE BENEFITS.—The term ‘‘collateral

source benefits’’ means any amount paid or reasonably likely

to be paid in the future to or on behalf of the claimant, or any

service, product or other benefit provided or reasonably likely

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to be provided in the future to or on behalf of the claimant, as

a result of injury or wrongful death, pursuant to— (A) any State or Federal health, sickness, income-disability, accident or workers’ compensation act;

(B) any health, sickness, income-disability, or accident

insurance that provides health benefits or income-disability coverage;

(C) any contract or agreement of any group, organization, partnership, or corporation to provide, pay for, or reimburse the cost of medical, hospital, dental, or income

disability benefits; and

(D) any other publicly or privately funded program.

(5) COMPLIES WITH FDA STANDARDS.—The term ‘‘complies

with FDA standards’’ means, in the case of any medical product, that such product is either— (A) subject to pre-market approval or review by the Food

and Drug Administration under section 505, 506, 510, 515

or 520 of the Federal Food, Drug, and Cosmetic Act (21

U.S.C. 355, 356, 360, 360e, 360j) or section 351 of the Public Health Service Act (42 U.S.C. 262) and such approval

or review concerns the adequacy of the packaging or labeling of such medical product or the safety of the formulation or performance of any aspect of such medical product

which a health care lawsuit claims caused the claimant’s

harm, and such medical product was marketed in conformity with the regulations under such sections, or

(B) generally recognized as safe and effective pursuant

to conditions established by the FDA and applicable FDA

regulations, including those related to packaging and labeling.

(6) CONTINGENT FEE.—The term ‘‘contingent fee’’ includes all

compensation to any person or persons which is payable only

if a recovery is effected on behalf of one or more claimants.

(7) ECONOMIC LOSS.—The term ‘‘economic loss’’ means reasonable amounts incurred for necessary health treatment and

medical expenses, lost wages, replacement service losses, and

other pecuniary expenditures due to personal injuries suffered

as a result of injury.

(8) FDA.—The term ‘‘FDA’’ means the Food and Drug Administration.

(9) HEALTH CARE GOODS OR SERVICES.—The term ‘‘health

care goods or services’’ means any medical product, or any

service provided by a health care provider or by any individual

working under the supervision of a health care provider, that

relates to the diagnosis, prevention, or treatment of any

human disease or impairment, or the assessment of the health

of human beings.

(10) HEALTH CARE LAWSUIT.—The term ‘‘health care lawsuit’’

means any health care liability claim concerning the provision

of health care goods or services, or any civil action concerning

the provision of health care goods or services brought in a

State or Federal Court or pursuant to an alternative dispute

resolution procedure, against a health care provider or the

manufacturer, distributor, supplier, marketer, promoter or seller of a medical product, regardless of the theory of liability on

47

which the claim is based, or the number of claimants, plaintiffs, defendants, or other parties, or the number of claims or

causes of action in which the claimant alleges a health care liability claim.

(11) HEALTH CARE LIABILITY CLAIM.—The term ‘‘health care

liability claim’’ means a demand by any person (whether or not

pursuant to an alternative dispute resolution system, an action

in State court, or an action in Federal court) concerning the

provision of health care goods or services, if made against a

health care provider or the manufacturer, distributor, supplier,

marketer, promoter or seller of a medical product, including

third-party claims, cross-claims, counter-claims, or contribution

claims, which are based upon the provision or use of (or the

failure to provide or use) health care services or medical products, regardless of the theory of liability on which the claim is

based, or the number of claimants, plaintiffs, defendants, or

other parties, or the number of claims or causes of action.

(12) HEALTH CARE PROVIDER.—The term ‘‘health care provider’’ means any person or entity required by State or Federal

laws or regulations to be licensed, registered, or certified to

provide health care goods or services or whose health care

goods or services are required to be so licensed, registered, or

certified, or which are exempted from such requirement by

other statute or regulation.

(13) INJURY.—The term ‘‘injury’’ means any illness, disease,

or other harm that is the subject of a health care liability

claim.

(14) MALICIOUS INTENT TO INJURE.—The term ‘‘malicious intent to injure’’ means intentionally causing or attempting to

cause physical injury other than providing health care goods or

services.

(15) MEDICAL PRODUCT.—The term ‘‘medical product’’ means

a drug (as defined in section 201(g)(1) of the Federal Food,

Drug and Cosmetic Act (21 U.S.C. 321(g)(1)) or a medical device as defined in section 201(h) of such Act (21 U.S.C. 321(h)),

including anycomponent or raw material used therein, but excluding health care services.

(16) NON-ECONOMIC LOSS.—The term ‘‘non-economic loss’’ means physical impairment, emotional distress, mental anguish, disfigurement, loss of enjoyment, loss of companionship,

loss of services, loss of consortium, and any other non-pecuniary losses.

(17) RECOVERY.—The term ‘‘recovery’’ means the net sum recovered after deducting any disbursements or costs incurred in

connection with prosecution or settlement of a claim, including

all costs paid or advanced by any person. Costs of health care

incurred by the plaintiff and the attorneys’ office overhead

costs or charges for legal services are not deductible disbursements or costs for such purpose.

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

States, the District of Columbia, the Commonwealth of Puerto

Rico, the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, the Trust Territory of the Pacific Islands,

and any other territory or possession of the United States, or

any political subdivision thereof.

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(20) STATE LAW.—The term ‘‘State law’’ includes all constitutional provisions, statutes, laws, judicial decisions, rules, regulations, or other State action having the effect of law in any

State.

SEC. 809. EFFECTIVE DATE; GENERAL PROVISIONS.

(a) IN GENERAL.—This title shall apply to any health care lawsuit brought in a Federal or State court, and to any health care liability claim subject to an alternative dispute resolution system,

that is initiated on or after the date of enactment of this Act, except that any health care lawsuit arising from an injury occurring

before the date of enactment of this Act shall be governed by the

applicable statute of limitations provisions in effect at the time the

injury occurred.

(b) HEALTH CARE LAWSUITS.—The provisions governing health

care lawsuits set forth in this title supersede chapter 171 of title

28, United States Code, relating to tort claims procedure and, subject to section 802, preempt State law to the extent that State law

differs from any provisions of law established by or under this title.

(c) PROTECTION OF STATES’ RIGHTS.—Any issue that is not governed by any provision of law established by or under this title (including State standards of negligence) will be governed by otherwise applicable State or Federal law. Subject to subsection (d)(2)

and section 802, this title does not preempt or supersede any law

that imposes greater protections for health care providers, plans,

and organizations from liability, loss, or damages that those provided by this title.

(d) RULE OF CONSTRUCTION.—No provision of this title shall be

construed to preempt—

(1) the implementation of any State sponsored or private alternative dispute resolution program;

(2) pursuant to section 802, any State statutory limit (whether enacted before, on, or after the date of the enactment of this

Act) on the total amount of economic, non-economic, or punitive damages that may be awarded in a health care lawsuit,

whether or not such State statutory limit permits the recovery

of a greater or lesser amount of such damages than is provided

for under section 804; or

(3) any defense available to a party in a health care lawsuit

under any other provision of Federal law.

Æ