I

106TH CONGRESS

1ST SESSION H. R. 1136

To increase the availability and choice of quality health care.

IN THE HOUSE OF REPRESENTATIVES

MARCH 16, 1999

Mr. NORWOOD (for himself, Mr. ARMEY, Mr. BURR of North Carolina, and

Mr. WELDON of Florida) introduced the following bill; which was referred

to the Committee on Commerce, and in addition to the Committees on

Education and the Workforce, and Ways and Means, for a period to be

subsequently determined by the Speaker, in each case for consideration

of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To increase the availability and choice of quality health care.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS

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

5 ‘‘Affordable Health Care Act of 1999’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—PROVIDING AFFORDABLE CARE THROUGH

HEALTHMARTS
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Sec. 101. Expansion of consumer choice through healthmarts.

‘‘TITLE XXVIII—HEALTHMARTS.

‘‘Sec. 2801. Definition of healthmart.

‘‘Sec. 2802. Application of certain laws and requirements.

‘‘Sec. 2803. Administration.

‘‘Sec. 2804. Definitions.

TITLE II—PROVIDING AFFORDABLE CARE THROUGH

ASSOCIATION HEALTH PLANS.

Sec. 201. Rules governing association health plans.

‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘Sec. 801. Association health plans.

‘‘Sec. 802. Certification of association health plans.

‘‘Sec. 803. Requirements relating to sponsors and boards of trustees.

‘‘Sec. 804. Participation and coverage requirements.

‘‘Sec. 805. Other requirements relating to plan documents, contribution

rates, and benefit options.

‘‘Sec. 806. Maintenance of reserves and provisions for solvency for plans

providing health benefits in addition to health insurance

coverage.

‘‘Sec. 807. Requirements for application and related requirements.

‘‘Sec. 808. Notice requirements for voluntary termination.

‘‘Sec. 809. Corrective actions and mandatory termination.

‘‘Sec. 810. Trusteeship by the secretary of insolvent association health

plans providing health benefits in addition to health insurance coverage.

‘‘Sec. 811. State assessment authority.

‘‘Sec. 812. Special rules for church plans.

‘‘Sec. 813. Definitions and rules of construction.

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

Sec. 203. Clarification of treatment of certain collectively bargained agreements.

Sec. 204. Enforcement provisions relating to association health plans.

Sec. 205. Cooperation between Federal and State authorities.

Sec. 206. Effective date and transitional and other rules.

TITLE III—PROVIDING AFFORDABLE CARE BY ALLOWING

HEALTH CARE COVERAGE CREDITS TO INDIVIDUALS

Sec. 301. Refundable credit for providers of qualified health coverage.

TITLE IV—PROVIDING AFFORDABLE CARE THROUGH MEDICAL

SAVINGS ACCOUNTS.

Sec. 401. Enhancement of availability of medical savings accounts.
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1 TITLE I—PROVIDING AFFORD2 ABLE CARE THROUGH

3 HEALTHMARTS

4 SEC. 101. EXPANSION OF CONSUMER CHOICE THROUGH

5 HEALTHMARTS.

6 (a) IN GENERAL.—The Public Health Service Act is

7 amended by adding at the end the following new title:

8 ‘‘TITLE XXVIII—HEALTHMARTS

9 ‘‘SEC. 2801. DEFINITION OF HEALTHMART.

10 ‘‘(a) IN GENERAL.—For purposes of this title, the

11 term ‘HealthMart’ means a legal entity that meets the fol12 lowing requirements:

13 ‘‘(1) ORGANIZATION.—The HealthMart is an

14 organization operated under the direction of a board

15 of directors which is composed of representatives of

16 not fewer than 2 from each of the following:

17 ‘‘(A) Employers.

18 ‘‘(B) Employees.

19 ‘‘(C) Health care providers, which may be

20 physicians, other health care professionals,

21 health care facilities, or any combination there22 of.

23 ‘‘(D) Entities, such as insurance compa24 nies, health maintenance organizations, and li25 censed provider-sponsored organizations, that
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1 underwrite or administer health benefits cov2 erage.

3 ‘‘(2) OFFERING HEALTH BENEFITS COV4 ERAGE.—

5 ‘‘(A) IN GENERAL.—The HealthMart, in

6 conjunction with those health insurance issuers

7 that offer health benefits coverage through the

8 HealthMart, makes available health benefits

9 coverage in the manner described in subsection

10 (b) to all employers and eligible employees in

11 the manner described in subsection (c)(2) at

12 rates (including employer’s and employee’s

13 share) that are established by the health insur14 ance issuer on a policy or product specific basis

15 and that may vary only as permissible under

16 State law. A HealthMart is deemed to be a

17 group health plan for purposes of applying sec18 tion 702 of the Employee Retirement Income

19 Security Act of 1974, section 2702 of this Act,

20 and section 9802(b) of the Internal Revenue

21 Code of 1986 (which limit variation among

22 similarly situated individuals of required pre23 miums for health benefits coverage on the basis

24 of health status-related factors).
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1 ‘‘(B) NONDISCRIMINATION IN COVERAGE

2 OFFERED.—

3 ‘‘(i) IN GENERAL.—Subject to clause

4 (ii), the HealthMart may not offer health

5 benefits coverage to an eligible employee in

6 a geographic area (as specified under para7 graph (3)(A)) unless the same coverage is

8 offered to all such employees in the same

9 geographic area. Section 2711(a)(1)(B) of

10 this Act limits denial of enrollment of cer11 tain eligible individuals under health bene12 fits coverage in the small group market.

13 ‘‘(ii) CONSTRUCTION.—Nothing in

14 this title shall be construed as requiring or

15 permitting a health insurance issuer to

16 provide coverage outside the service area of

17 the issuer, as approved under State law.

18 ‘‘(C) NO FINANCIAL UNDERWRITING.—The

19 HealthMart provides health benefits coverage

20 only through contracts with health insurance

21 issuers and does not assume insurance risk with

22 respect to such coverage.

23 ‘‘(D) MINIMUM COVERAGE.—By the end of

24 the first year of its operation and thereafter,
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1 the HealthMart maintains not fewer than 10

2 purchasers and 100 members.

3 ‘‘(3) GEOGRAPHIC AREAS.—

4 ‘‘(A) SPECIFICATION OF GEOGRAPHIC

5 AREAS.—The HealthMart shall specify the geo6 graphic area (or areas) in which it makes avail7 able health benefits coverage offered by health

8 insurance issuers to employers. Such an area

9 shall encompass at least one entire county or

10 equivalent area.

11 ‘‘(B) MULTISTATE AREAS.—In the case of

12 a HealthMart that serves more than one State,

13 such geographic areas may be areas that in14 clude portions of two or more contiguous

15 States.

16 ‘‘(C) MULTIPLE HEALTHMARTS PER17 MITTED IN SINGLE GEOGRAPHIC AREA.—Noth18 ing in this title shall be construed as preventing

19 the establishment and operation of more than

20 one HealthMart in a geographic area or as lim21 iting the number of HealthMarts that may op22 erate in any area.

23 ‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES

24 TO PURCHASERS.—
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1 ‘‘(A) IN GENERAL.—The HealthMart pro2 vides administrative services for purchasers.

3 Such services may include accounting, billing,

4 enrollment information, and employee coverage

5 status reports.

6 ‘‘(B) CONSTRUCTION.—Nothing in this

7 subsection shall be construed as preventing a

8 HealthMart from serving as an administrative

9 service organization to any entity.

10 ‘‘(5) DISSEMINATION OF INFORMATION.—The

11 HealthMart collects and disseminates (or arranges

12 for the collection and dissemination of) consumer13 oriented information on the scope, cost, and enrollee

14 satisfaction of all coverage options offered through

15 the HealthMart to its members and eligible individ16 uals. Such information shall be defined by the

17 HealthMart and shall be in a manner appropriate to

18 the type of coverage offered. To the extent prac19 ticable, such information shall include information

20 on provider performance, locations and hours of op21 eration of providers, outcomes, and similar matters.

22 Nothing in this section shall be construed as pre23 venting the dissemination of such information or

24 other information by the HealthMart or by health

25 insurance issuers through electronic or other means.
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1 ‘‘(6) FILING INFORMATION.—The Health2 Mart—

3 ‘‘(A) files with the applicable Federal au4 thority information that demonstrates the

5 HealthMart’s compliance with the applicable re6 quirements of this title; or

7 ‘‘(B) in accordance with rules established

8 under section 2803(a), files with a State such

9 information as the State may require to dem10 onstrate such compliance.

11 ‘‘(b) HEALTH BENEFITS COVERAGE REQUIRE12 MENTS.—

13 ‘‘(1) COMPLIANCE WITH CONSUMER PROTEC14 TION REQUIREMENTS.—Any health benefits coverage

15 offered through a HealthMart shall—

16 ‘‘(A) be underwritten by a health insurance

17 issuer that—

18 ‘‘(i) is licensed (or otherwise regu19 lated) under State law (or is a community

20 health organization that is offering health

21 insurance coverage pursuant to section

22 330D(a));

23 ‘‘(ii) meets all applicable State stand24 ards relating to consumer protection, sub25 ject to section 2802(b); and
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1 ‘‘(iii) offers the coverage under a con2 tract with the HealthMart;

3 ‘‘(B) subject to paragraph (2), be approved

4 or otherwise permitted to be offered under

5 State law; and

6 ‘‘(C) provide full portability of creditable

7 coverage for individuals who remain members of

8 the same HealthMart notwithstanding that they

9 change the employer through which they are

10 members in accordance with the provisions of

11 the parts 6 and 7 of subtitle B of title I of the

12 Employee Retirement Income Security Act of

13 1974 and titles XXII and XXVII of this Act,

14 so long as both employers are purchasers in the

15 HealthMart.

16 ‘‘(2) ALTERNATIVE PROCESS FOR APPROVAL OF

17 HEALTH BENEFITS COVERAGE IN CASE OF DISCRIMI18 NATION OR DELAY.—

19 ‘‘(A) IN GENERAL.—The requirement of

20 paragraph (1)(B) shall not apply to a policy or

21 product of health benefits coverage offered in a

22 State if the health insurance issuer seeking to

23 offer such policy or product files an application

24 to waive such requirement with the applicable

25 Federal authority, and the authority deter-
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1 mines, based on the application and other evi2 dence presented to the authority, that—

3 ‘‘(i) either (or both) of the grounds de4 scribed in subparagraph (B) for approval of the

5 application has been met; and

6 ‘‘(ii) the coverage meets the applicable

7 State standards (other than those that have

8 been preempted under section 2802).

9 ‘‘(B) GROUNDS.—The grounds described in this

10 subparagraph with respect to a policy or product of

11 health benefits coverage are as follows:

12 ‘‘(i) FAILURE TO ACT ON POLICY, PROD13 UCT, OR RATE APPLICATION ON A TIMELY

14 BASIS.—The State has failed to complete action

15 on the policy or product (or rates for the policy

16 or product) within 90 days of the date of the

17 State’s receipt of a substantially complete appli18 cation. No period before the date of the enact19 ment of this section shall be included in deter20 mining such 90-day period.

21 ‘‘(ii) DENIAL OF APPLICATION BASED ON

22 DISCRIMINATORY TREATMENT.—The State has

23 denied such an application and—

24 ‘‘(I) the standards or review process

25 imposed by the State as a condition of ap-
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1 proval of the policy or product imposes ei2 ther any material requirements, proce3 dures, or standards to such policy or prod4 uct that are not generally applicable to

5 other policies and products offered or any

6 requirements that are preempted under

7 section 2802; or

8 ‘‘(II) the State requires the issuer, as

9 a condition of approval of the policy or

10 product, to offer any policy or product

11 other than such policy or product.

12 ‘‘(C) ENFORCEMENT.—In the case of a

13 waiver granted under subparagraph (A) to an

14 issuer with respect to a State, the Secretary

15 may enter into an agreement with the State

16 under which the State agrees to provide for

17 monitoring and enforcement activities with re18 spect to compliance of such an issuer and its

19 health insurance coverage with the applicable

20 State standards described in subparagraph

21 (A)(ii). Such monitoring and enforcement shall

22 be conducted by the State in the same manner

23 as the State enforces such standards with re24 spect to other health insurance issuers and

25 plans, without discrimination based on the type
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1 of issuer to which the standards apply. Such an

2 agreement shall specify or establish mechanisms

3 by which compliance activities are undertaken,

4 while not lengthening the time required to re5 view and process applications for waivers under

6 subparagraph (A).

7 ‘‘(3) EXAMPLES OF TYPES OF COVERAGE.—The

8 health benefits coverage made available through a

9 HealthMart may include, but is not limited to, any

10 of the following if it meets the other applicable re11 quirements of this title:

12 ‘‘(A) Coverage through a health mainte13 nance organization.

14 ‘‘(B) Coverage in connection with a pre15 ferred provider organization.

16 ‘‘(C) Coverage in connection with a li17 censed provider-sponsored organization.

18 ‘‘(D) Indemnity coverage through an insur19 ance company.

20 ‘‘(E) Coverage offered in connection with a

21 contribution into a medical savings account or

22 flexible spending account.

23 ‘‘(F) Coverage that includes a point-of24 service option.
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1 ‘‘(G) Coverage offered by a community

2 health organization (as defined in section

3 330D(e)).

4 ‘‘(H) Any combination of such types of

5 coverage.

6 ‘‘(4) WELLNESS BONUSES FOR HEALTH PRO7 MOTION.—Nothing in this title shall be construed as

8 precluding a health insurance issuer offering health

9 benefits coverage through a HealthMart from estab10 lishing premium discounts or rebates for members or

11 from modifying otherwise applicable copayments or

12 deductibles in return for adherence to programs of

13 health promotion and disease prevention so long as

14 such programs are agreed to in advance by the

15 HealthMart and comply with all other provisions of

16 this title and do not discriminate among similarly

17 situated members.

18 ‘‘(c) PURCHASERS; MEMBERS; HEALTH INSURANCE

19 ISSUERS.—

20 ‘‘(1) PURCHASERS.—

21 ‘‘(A) IN GENERAL.—Subject to the provi22 sions of this title, a HealthMart shall permit

23 any employer to contract with the HealthMart

24 for the purchase of health benefits coverage for

25 its employees and dependents of those employ-
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1 ees and may not vary conditions of eligibility

2 (including premium rates and membership fees)

3 of an employer to be a purchaser.

4 ‘‘(B) ROLE OF ASSOCIATIONS, BROKERS,

5 AND LICENSED HEALTH INSURANCE AGENTS.—

6 Nothing in this section shall be construed as

7 preventing an association, broker, licensed

8 health insurance agent, or other entity from as9 sisting or representing a HealthMart or employ10 ers from entering into appropriate arrange11 ments to carry out this title.

12 ‘‘(C) PERIOD OF CONTRACT.—The

13 HealthMart may not require a contract under

14 subparagraph (A) between a HealthMart and a

15 purchaser to be effective for a period of longer

16 than 12 months. The previous sentence shall

17 not be construed as preventing such a contract

18 from being extended for additional 12-month

19 periods or preventing the purchaser from volun20 tarily electing a contract period of longer than

21 12 months.

22 ‘‘(D) EXCLUSIVE NATURE OF CON23 TRACT.—Such a contract shall provide that the

24 purchaser agrees not to obtain or sponsor

25 health benefits coverage, on behalf of any eligi-
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1 ble employees (and their dependents), other

2 than through the HealthMart. The previous

3 sentence shall not apply to an eligible individual

4 who resides in an area for which no coverage is

5 offered by any health insurance issuer through

6 the HealthMart.

7 ‘‘(2) MEMBERS.—

8 ‘‘(A) IN GENERAL.—Under rules estab9 lished to carry out this title, with respect to an

10 employer that has a purchaser contract with a

11 HealthMart, individuals who are employees of

12 the employer may enroll for health benefits cov13 erage (including coverage for dependents of

14 such enrolling employees) offered by a health

15 insurance issuer through the HealthMart.

16 ‘‘(B) NONDISCRIMINATION IN ENROLL17 MENT.—A HealthMart may not deny enroll18 ment as a member to an individual who is an

19 employee (or dependent of such an employee)

20 eligible to be so enrolled based on health status21 related factors, except as may be permitted con22 sistent with section 2742(b).

23 ‘‘(C) ANNUAL OPEN ENROLLMENT PE24 RIOD.—In the case of members enrolled in

25 health benefits coverage offered by a health in-
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1 surance issuer through a HealthMart, subject

2 to subparagraph (D), the HealthMart shall pro3 vide for an annual open enrollment period of 30

4 days during which such members may change

5 the coverage option in which the members are

6 enrolled.

7 ‘‘(D) RULES OF ELIGIBILITY.—Nothing in

8 this paragraph shall preclude a HealthMart

9 from establishing rules of employee eligibility

10 for enrollment and reenrollment of members

11 during the annual open enrollment period under

12 subparagraph (C). Such rules shall be applied

13 consistently to all purchasers and members

14 within the HealthMart and shall not be based

15 in any manner on health status-related factors

16 and may not conflict with sections 2701 and

17 2702 of this Act.

18 ‘‘(3) HEALTH INSURANCE ISSUERS.—

19 ‘‘(A) PREMIUM COLLECTION.—The con20 tract between a HealthMart and a health insur21 ance issuer shall provide, with respect to a

22 member enrolled with health benefits coverage

23 offered by the issuer through the HealthMart,

24 for the payment of the premiums collected by

25 the HealthMart (or the issuer) for such cov-
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1 erage (less a pre-determined administrative

2 charge negotiated by the HealthMart and the

3 issuer) to the issuer.

4 ‘‘(B) SCOPE OF SERVICE AREA.—Nothing

5 in this title shall be construed as requiring the

6 service area of a health insurance issuer with

7 respect to health insurance coverage to cover

8 the entire geographic area served by a

9 HealthMart.

10 ‘‘(C) AVAILABILITY OF COVERAGE OP11 TIONS.—

12 ‘‘(i) IN GENERAL.—A HealthMart

13 shall enter into contracts with one or more

14 health insurance issuers in a manner that

15 assures that at least 4 health insurance

16 coverage options are made available in the

17 geographic area specified under subsection

18 (a)(3)(A).

19 ‘‘(ii) REQUIREMENT OF NON NET20 WORK OPTION.—At least 1 of the health

21 insurance coverage options made available

22 under clause (i) shall be a non network

23 coverage option.

24 ‘‘(iii) EXEMPTION FROM STATE MAN25 DATES.—The provisions of section
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1 2802(b)(1) shall not apply to at least 2 of

2 the health insurance coverage options

3 made available under clause (i).

4 ‘‘(d) PREVENTION OF CONFLICTS OF INTEREST.—

5 ‘‘(1) FOR BOARDS OF DIRECTORS.—A member

6 of a board of directors of a HealthMart may not

7 serve as an employee or paid consultant to the

8 HealthMart, but may receive reasonable reimburse9 ment for travel expenses for purposes of attending

10 meetings of the board or committees thereof.

11 ‘‘(2) FOR BOARDS OF DIRECTORS OR EMPLOY12 EES.—An individual is not eligible to serve in a paid

13 or unpaid capacity on the board of directors of a

14 HealthMart or as an employee of the HealthMart, if

15 the individual is employed by, represents in any ca16 pacity, owns, or controls any ownership interest in

17 a organization from whom the HealthMart receives

18 contributions, grants, or other funds not connected

19 with a contract for coverage through the

20 HealthMart.

21 ‘‘(3) EMPLOYMENT AND EMPLOYEE REP22 RESENTATIVES.—

23 ‘‘(A) IN GENERAL.—An individual who is

24 serving on a board of directors of a HealthMart

25 as a representative described in subparagraph
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1 (A) or (B) of section 2801(a)(1) shall not be

2 employed by or affiliated with a health insur3 ance issuer or be licensed as or employed by or

4 affiliated with a health care provider.

5 ‘‘(B) CONSTRUCTION.—For purposes of

6 subparagraph (A), the term ‘affiliated’ does not

7 include membership in a health benefits plan or

8 the obtaining of health benefits coverage offered

9 by a health insurance issuer.

10 ‘‘(e) CONSTRUCTION.—

11 ‘‘(1) NETWORK OF AFFILIATED

12 HEALTHMARTS.—Nothing in this section shall be

13 construed as preventing one or more HealthMarts

14 serving different areas (whether or not contiguous)

15 from providing for some or all of the following

16 (through a single administrative organization or oth17 erwise):

18 ‘‘(A) Coordinating the offering of the same

19 or similar health benefits coverage in different

20 areas served by the different HealthMarts.

21 ‘‘(B) Providing for crediting of deductibles

22 and other cost-sharing for individuals who are

23 provided health benefits coverage through the

24 HealthMarts (or affiliated HealthMarts)

25 after—
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1 ‘‘(i) a change of employers through

2 which the coverage is provided; or

3 ‘‘(ii) a change in place of employment

4 to an area not served by the previous

5 HealthMart.

6 ‘‘(2) PERMITTING HEALTHMARTS TO ADJUST

7 DISTRIBUTIONS AMONG ISSUERS TO REFLECT REL8 ATIVE RISK OF ENROLLEES.—Nothing in this sec9 tion shall be construed as precluding a HealthMart

10 from providing for adjustments in amounts distrib11 uted among the health insurance issuers offering

12 health benefits coverage through the HealthMart

13 based on factors such as the relative health care risk

14 of members enrolled under the coverage offered by

15 the different issuers.

16 ‘‘(3) APPLICATION OF UNIFORM MINIMUM PAR17 TICIPATION AND CONTRIBUTION RULES.—Nothing

18 in this section shall be construed as precluding a

19 HealthMart from establishing minimum participa20 tion and contribution rules (described in section

21 2711(e)(1)) for employers that apply to become pur22 chasers in the HealthMart, so long as such rules are

23 applied uniformly for all health insurance issuers.
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1 ‘‘SEC. 2802. APPLICATION OF CERTAIN LAWS AND REQUIRE2 MENTS.

3 ‘‘(a) AUTHORITY OF STATES.—Nothing in this sec4 tion shall be construed as preempting State laws relating

5 to the following:

6 ‘‘(1) The regulation of underwriters of health

7 coverage, including licensure and solvency require8 ments.

9 ‘‘(2) The application of premium taxes and re10 quired payments for guaranty funds or for contribu11 tions to high-risk pools.

12 ‘‘(3) The application of fair marketing require13 ments and other consumer protections (other than

14 those specifically relating to an item described in

15 subsection (b)).

16 ‘‘(4) The application of requirements relating to

17 the adjustment of rates for health insurance cov18 erage.

19 ‘‘(b) TREATMENT OF BENEFIT AND GROUPING RE20 QUIREMENTS.—State laws insofar as they relate to any

21 of the following are superseded and shall not apply to

22 health benefits coverage options made available through

23 a HealthMart:

24 ‘‘(1) Benefit requirements for health benefits

25 coverage offered through a HealthMart, including

26 (but not limited to) requirements relating to cov-
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1 erage of specific providers, specific services or condi2 tions, or the amount, duration, or scope of benefits,

3 but not including requirements to the extent re4 quired to implement title XXVII or other Federal

5 law.

6 ‘‘(2) Requirements (commonly referred to as

7 fictitious group laws) relating to grouping and simi8 lar requirements for such coverage to the extent

9 such requirements impede the establishment and op10 eration of HealthMarts pursuant to this title.

11 ‘‘(3) Any other requirements (including limita12 tions on compensation arrangements) that, directly

13 or indirectly, preclude (or have the effect of pre14 cluding) the offering of such coverage through a

15 HealthMart, if the HealthMart meets the require16 ments of this title.

17 Any State law or regulation relating to the composition

18 or organization of a HealthMart is preempted to the ex19 tent the law or regulation is inconsistent with the provi20 sions of this title.

21 ‘‘(c) APPLICATION OF ERISA FIDUCIARY AND DIS22 CLOSURE REQUIREMENTS.—The board of directors of a

23 HealthMart is deemed to be a plan administrator of an

24 employee welfare benefit plan which is a group health plan

25 for purposes of applying parts 1 and 4 of subtitle B of
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1 title I of the Employee Retirement Income Security Act

2 of 1974 and those provisions of part 5 of such subtitle

3 which are applicable to enforcement of such parts 1 and

4 4, and the HealthMart shall be treated as such a plan

5 and the enrollees shall be treated as participants and bene6 ficiaries for purposes of applying such provisions pursuant

7 to this subsection.

8 ‘‘(d) APPLICATION OF ERISA RENEWABILITY PRO9 TECTION.—A HealthMart is deemed to be group health

10 plan that is a multiple employer welfare arrangement for

11 purposes of applying section 703 of the Employee Retire12 ment Income Security Act of 1974.

13 ‘‘(e) APPLICATION OF RULES FOR NETWORK PLANS

14 AND FINANCIAL CAPACITY.—The provisions of sub15 sections (c) and (d) of section 2711 apply to health bene16 fits coverage offered by a health insurance issuer through

17 a HealthMart.

18 ‘‘(f) CONSTRUCTION RELATING TO OFFERING RE19 QUIREMENT.—Nothing in section 2711(a) of this Act or

20 703 of the Employee Retirement Income Security Act of

21 1974 shall be construed as permitting the offering outside

22 the HealthMart of health benefits coverage that is only

23 made available through a HealthMart under this section

24 because of the application of subsection (b).
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1 ‘‘(g) APPLICATION TO GUARANTEED RENEWABILITY

2 REQUIREMENTS IN CASE OF DISCONTINUATION OF AN

3 ISSUER.—For purposes of applying section 2712 in the

4 case of health insurance coverage offered by a health in5 surance issuer through a HealthMart, if the contract be6 tween the HealthMart and the issuer is terminated and

7 the HealthMart continues to make available any health in8 surance coverage after the date of such termination, the

9 following rules apply:

10 ‘‘(1) RENEWABILITY.—The HealthMart shall

11 fulfill the obligation under such section of the issuer

12 renewing and continuing in force coverage by offer13 ing purchasers (and members and their dependents)

14 all available health benefits coverage that would oth15 erwise be available to similarly-situated purchasers

16 and members from the remaining participating

17 health insurance issuers in the same manner as

18 would be required of issuers under section 2712(c).

19 ‘‘(2) APPLICATION OF ASSOCIATION RULES.—

20 The HealthMart shall be considered an association

21 for purposes of applying section 2712(e).

22 ‘‘(h) CONSTRUCTION IN RELATION TO CERTAIN

23 OTHER LAWS.—Nothing in this title shall be construed

24 as modifying or affecting the applicability to HealthMarts

25 or health benefits coverage offered by a health insurance
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1 issuer through a HealthMart of parts 6 and 7 of subtitle

2 B of title I of the Employee Retirement Income Security

3 Act of 1974 or titles XXII and XXVII of this Act.

4 ‘‘SEC. 2803. ADMINISTRATION.

5 ‘‘(a) IN GENERAL.—The applicable Federal authority

6 shall administer this title through the division established

7 under subsection (b) and is authorized to issue such regu8 lations as may be required to carry out this title. Such

9 regulations shall be subject to Congressional review under

10 the provisions of chapter 8 of title 5, United States Code.

11 The applicable Federal authority shall incorporate the

12 process of deemed file and use’ with respect to the infor13 mation filed under section 2801(a)(6)(A) and shall deter14 mine whether information filed by a HealthMart dem15 onstrates compliance with the applicable requirements of

16 this title. Such authority shall exercise its authority under

17 this title in a manner that fosters and promotes the devel18 opment of HealthMarts in order to improve access to

19 health care coverage and services.

20 ‘‘(b) ADMINISTRATION THROUGH HEALTH CARE

21 MARKETPLACE DIVISION.—

22 ‘‘(1) IN GENERAL.—The applicable Federal au23 thority shall carry out its duties under this title

24 through a separate Health Care Marketplace Divi-
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1 sion, the sole duty of which (including the staff of

2 which) shall be to administer this title.

3 ‘‘(2) ADDITIONAL DUTIES.—In addition to

4 other responsibilities provided under this title, such

5 Division is responsible for—

6 ‘‘(A) oversight of the operations of

7 HealthMarts under this title; and

8 ‘‘(B) the periodic submittal to Congress of

9 reports on the performance of HealthMarts

10 under this title under subsection (c).

11 ‘‘(c) PERIODIC REPORTS.—The applicable Federal

12 authority shall submit to Congress a report every 30

13 months, during the 10-year period beginning on the effec14 tive date of the rules promulgated by the applicable Fed15 eral authority to carry out this title, on the effectiveness

16 of this title in promoting coverage of uninsured individ17 uals. Such authority may provide for the production of

18 such reports through one or more contracts with appro19 priate private entities.

20 ‘‘SEC. 2804. DEFINITIONS.

21 ‘‘For purposes of this title:

22 ‘‘(1) APPLICABLE FEDERAL AUTHORITY.—The

23 term ‘Applicable Federal Authority’ means the Sec24 retary of Health and Human Services.
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1 ‘‘(2) ELIGIBLE EMPLOYEE OR INDIVIDUAL.—

2 The term ‘eligible’ means, with respect to an em3 ployee or other individual and a HealthMart, an em4 ployee or individual who is eligible under section

5 2801(c)(2) to enroll or be enrolled in health benefits

6 coverage offered through the HealthMart.

7 ‘‘(3) EMPLOYER; EMPLOYEE; DEPENDENT.—

8 Except as the applicable Federal authority may oth9 erwise provide, the terms ‘employer’, ‘employee’, and

10 ‘dependent’, as applied to health insurance coverage

11 offered by a health insurance issuer licensed (or oth12 erwise regulated) in a State, shall have the meanings

13 applied to such terms with respect to such coverage

14 under the laws of the State relating to such coverage

15 and such an issuer.

16 ‘‘(4) HEALTH BENEFITS COVERAGE.—The term

17 ‘health benefits coverage’ has the meaning given the

18 term group health insurance coverage insection

19 2791(b)(4).

20 ‘‘(5) HEALTH INSURANCE ISSUER.—The term

21 ‘health insurance issuer’ has the meaning given such

22 term in section 2791(b)(2) and includes a commu23 nity health organization that is offering coverage

24 pursuant to section 330D(a).
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1 ‘‘(6) HEALTH STATUS-RELATED FACTOR.—The

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

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

4 ‘‘(7) HEALTHMART.—The term ‘HealthMart’ is

5 defined in section 2801(a).

6 ‘‘(8) MEMBER.—The term ‘member’ means,

7 with respect to a HealthMart, an individual enrolled

8 for health benefits coverage through the HealthMart

9 under section 2801(c)(2).

10 ‘‘(9) NETWORK COVERAGE.—The term ‘‘net11 work coverage’’ means, with respect to a group

12 health plan or health insurance coverage offered by

13 a health insurance issuer, health benefits coverage

14 that provides or arranges for the provision of health

15 care items and services to participants, beneficiaries,

16 or enrollees through participating health profes17 sionals and providers.

18 ‘‘(10) PURCHASER.—The term ‘purchaser’

19 means, with respect to a HealthMart, a employer

20 that has contracted under section 2801(c)(1)(A)

21 with the HealthMart for the purchase of health ben22 efits coverage.’’.

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

24 subsection (a) shall take effect on January 1, 2000. The

25 Secretary of Health and Human Services shall first issue
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1 all regulations necessary to carry out such amendment be2 fore such date.

3 TITLE II—PROVIDING AFFORD4 ABLE CARE THROUGH ASSO5 CIATION HEALTH PLANS.

6 SEC. 201. RULES GOVERNING ASSOCIATION HEALTH

7 PLANS.

8 (a) IN GENERAL.—Subtitle B of title I of the Em9 ployee Retirement Income Security Act of 1974 is amend10 ed by adding after part 7 the following new part:

11 ‘‘Part 8—Rules Governing Association Health Plans

12 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS.

13 ‘‘(a) IN GENERAL.—For purposes of this part, the

14 term ‘association health plan’ means a group health plan

15 whose sponsor is (or is deemed under this part to be) de16 scribed in subsection (b).

17 ‘‘(b) SPONSORSHIP.—The sponsor of a group health

18 plan is described in this subsection if such sponsor—

19 ‘‘(1) is organized and maintained in good faith,

20 with a constitution and bylaws specifically stating its

21 purpose and providing for periodic meetings on at

22 least an annual basis, as a trade association, an in23 dustry association (including a rural electric cooper24 ative association or a rural telephone cooperative as25 sociation), a professional association, or a chamber
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1 of commerce (or similar business association, includ2 ing a corporation or similar organization that oper3 ates on a cooperative basis (within the meaning of

4 section 1381 of the Internal Revenue Code of

5 1986)), for substantial purposes other than that of

6 obtaining or providing medical care;

7 ‘‘(2) is established as a permanent entity which

8 receives the active support of its members and col9 lects from its members on a periodic basis dues or

10 payments necessary to maintain eligibility for mem11 bership in the sponsor; and

12 ‘‘(3) does not condition membership, such dues

13 or payments, or coverage under the plan on the

14 basis of health status-related factors with respect to

15 the employees of its members (or affiliated mem16 bers), or the dependents of such employees, and does

17 not condition such dues or payments on the basis of

18 group health plan participation.

19 Any sponsor consisting of an association of entities which

20 meet the requirements of paragraphs (1) and (2) shall be

21 deemed to be a sponsor described in this subsection.

22 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH

23 PLANS.

24 ‘‘(a) IN GENERAL.—The applicable authority shall

25 prescribe by regulation a procedure under which, subject
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1 to subsection (b), the applicable authority shall certify as2 sociation health plans which apply for certification as

3 meeting the requirements of this part.

4 ‘‘(b) STANDARDS.—Under the procedure prescribed

5 pursuant to subsection (a), the applicable authority shall

6 certify an association health plan as meeting the require7 ments of this part only if the applicable authority is satis8 fied that—

9 ‘‘(1) such certification—

10 ‘‘(A) is administratively feasible;

11 ‘‘(B) is not adverse to the interests of the

12 individuals covered under the plan; and

13 ‘‘(C) is protective of the rights and benefits

14 of the individuals covered under the plan; and

15 ‘‘(2) the applicable requirements of this part

16 are met (or, upon the date on which the plan is to

17 commence operations, will be met) with respect to

18 the plan.

19 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

20 PLANS.—An association health plan with respect to which

21 certification under this part is in effect shall meet the ap22 plicable requirements of this part, effective on the date

23 of certification (or, if later, on the date on which the plan

24 is to commence operations).
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1 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI2 CATION.—The applicable authority may provide by regula3 tion for continued certification of association health plans

4 under this part, including requirements relating to com5 mencement of new benefit options by plans which do not

6 consist of health insurance coverage.

7 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

8 PLANS.—The applicable authority shall establish a class

9 certification procedure for association health plans under

10 which all benefits consist of health insurance coverage.

11 Under such procedure, the applicable authority shall pro12 vide for the granting of certification under this part to

13 the plans in each class of such association health plans

14 upon appropriate filing under such procedure in connec15 tion with plans in such class and payment of the pre16 scribed fee under section 807(a).

17 ‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND

18 BOARDS OF TRUSTEES.

19 ‘‘(a) SPONSOR.—The requirements of this subsection

20 are met with respect to an association health plan if—

21 ‘‘(1) the sponsor (together with its immediate

22 predecessor, if any) has met (or is deemed under

23 this part to have met) for a continuous period of not

24 less than 3 years ending with the date of the appli25 cation for certification under this part, the require-
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1 ments of paragraphs (1) and (2) of section 801(b);

2 and

3 ‘‘(2) the sponsor meets (or is deemed under this

4 part to meet) the requirements of section 801(b)(3).

5 ‘‘(b) BOARD OF TRUSTEES.—The requirements of

6 this subsection are met with respect to an association

7 health plan if the following requirements are met:

8 ‘‘(1) FISCAL CONTROL.—The plan is operated,

9 pursuant to a trust agreement, by a board of trust10 ees which has complete fiscal control over the plan

11 and which is responsible for all operations of the

12 plan.

13 ‘‘(2) RULES OF OPERATION AND FINANCIAL

14 CONTROLS.—The board of trustees has in effect

15 rules of operation and financial controls, based on a

16 3-year plan of operation, adequate to carry out the

17 terms of the plan and to meet all requirements of

18 this title applicable to the plan.

19 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

20 PARTICIPATING EMPLOYERS AND TO CONTRAC21 TORS.—

22 ‘‘(A) IN GENERAL.—Except as provided in

23 subparagraph (B), the members of the board of

24 trustees are individuals selected from individ25 uals who are the owners, officers, directors, or
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1 employees of the participating employers or who

2 are partners in the participating employers and

3 actively participate in the business.

4 ‘‘(B) LIMITATION.—

5 ‘‘(i) GENERAL RULE.—Except as pro6 vided in clauses (ii) and (iii), no such

7 member is an owner, officer, director, or

8 employee of, or partner in, a contract ad9 ministrator or other service provider to the

10 plan.

11 ‘‘(ii) LIMITED EXCEPTION FOR PRO12 VIDERS OF SERVICES SOLELY ON BEHALF

13 OF THE SPONSOR.—Officers or employees

14 of a sponsor which is a service provider

15 (other than a contract administrator) to

16 the plan may be members of the board if

17 they constitute not more than 25 percent

18 of the membership of the board and they

19 do not provide services to the plan other

20 than on behalf of the sponsor.

21 ‘‘(iii) TREATMENT OF PROVIDERS OF

22 MEDICAL CARE.—In the case of a sponsor

23 which is an association whose membership

24 consists primarily of providers of medical

25 care, clause (i) shall not apply in the case
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1 of any service provider described in sub2 paragraph (A) who is a provider of medical

3 care under the plan.

4 ‘‘(C) SOLE AUTHORITY.—The board has

5 sole authority to approve applications for par6 ticipation in the plan and to contract with a

7 service provider to administer the day-to-day af8 fairs of the plan.

9 ‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In

10 the case of a group health plan which is established and

11 maintained by a franchiser for a franchise network con12 sisting of its franchisees—

13 ‘‘(1) the requirements of subsection (a) and sec14 tion 801(a)(1) shall be deemed met if such require15 ments would otherwise be met if the franchiser were

16 deemed to be the sponsor referred to in section

17 801(b), such network were deemed to be an associa18 tion described in section 801(b), and each franchisee

19 were deemed to be a member (of the association and

20 the sponsor) referred to in section 801(b); and

21 ‘‘(2) the requirements of section 804(a)(1) shall

22 be deemed met.

23 ‘‘(d) CERTAIN COLLECTIVELY BARGAINED PLANS.—

24 -
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1 ‘‘(1) IN GENERAL.—In the case of a group

2 health plan described in paragraph (2)—

3 ‘‘(A) the requirements of subsection (a)

4 and section 801(a)(1) shall be deemed met;

5 ‘‘(B) the joint board of trustees shall be

6 deemed a board of trustees with respect to

7 which the requirements of subsection (b) are

8 met; and

9 ‘‘(C) the requirements of section 804 shall

10 be deemed met.

11 ‘‘(2) REQUIREMENTS.—A group health plan is

12 described in this paragraph if—

13 ‘‘(A) the plan is a multiemployer plan; or

14 ‘‘(B) the plan is in existence on April 1,

15 1997, and would be described in section

16 3(40)(A)(i) but solely for the failure to meet

17 the requirements of section 3(40)(C)(ii).

18 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE19 MENTS.

20 ‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The

21 requirements of this subsection are met with respect to

22 an association health plan if, under the terms of the

23 plan—

24 ‘‘(1) all participating employers must be mem25 bers or affiliated members of the sponsor, except
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1 that, in the case of a sponsor which is a professional

2 association or other individual-based association, if

3 at least one of the officers, directors, or employees

4 of an employer, or at least one of the individuals

5 who are partners in an employer and who actively

6 participates in the business, is a member or affili7 ated member of the sponsor, participating employers

8 may also include such employer; and

9 ‘‘(2) all individuals commencing coverage under

10 the plan after certification under this part must

11 be—

12 ‘‘(A) active or retired owners (including

13 self-employed individuals), officers, directors, or

14 employees of, or partners in, participating em15 ployers; or

16 ‘‘(B) the beneficiaries of individuals de17 scribed in subparagraph (A).

18 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM19 PLOYEES.—The requirements of this subsection are met

20 with respect to an association health plan if, under the

21 terms of the plan, no affiliated member of the sponsor may

22 be offered coverage under the plan as a participating em23 ployer, unless—
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1 ‘‘(1) the affiliated member was an affiliated

2 member on the date of certification under this part;

3 or

4 ‘‘(2) during the 12-month period preceding the

5 date of the offering of such coverage, the affiliated

6 member has not maintained or contributed to a

7 group health plan with respect to any of its employ8 ees who would otherwise be eligible to participate in

9 such association health plan.

10 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re11 quirements of this subsection are met with respect to an

12 association health plan if, under the terms of the plan,

13 no participating employer may provide health insurance

14 coverage in the individual market for any employee not

15 covered under the plan which is similar to the coverage

16 contemporaneously provided to employees of the employer

17 under the plan, if such exclusion of the employee from cov18 erage under the plan is based on a health status-related

19 factor with respect to the employee and such employee

20 would, but for such exclusion on such basis, be eligible

21 for coverage under the plan.

22 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

23 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI24 PATE.—The requirements of this subsection are met with

25 respect to an association health plan if—
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1 ‘‘(1) under the terms of the plan, no employer

2 meeting the preceding requirements of this section is

3 excluded as a participating employer, unless partici4 pation or contribution requirements of the type re5 ferred to in section 2711 of the Public Health Serv6 ice Act are not met with respect to the excluded em7 ployer;

8 ‘‘(2) the applicable requirements of sections

9 701, 702, and 703 are met with respect to the plan;

10 and

11 ‘‘(3) applicable benefit options under the plan

12 are actively marketed to all eligible participating em13 ployers.

14 ‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN

15 DOCUMENTS, CONTRIBUTION RATES, AND

16 BENEFIT OPTIONS.

17 ‘‘(a) IN GENERAL.—The requirements of this section

18 are met with respect to an association health plan if the

19 following requirements are met:

20 ‘‘(1) CONTENTS OF GOVERNING INSTRU21 MENTS.—The instruments governing the plan in22 clude a written instrument, meeting the require23 ments of an instrument required under section

24 402(a)(1), which—
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1 ‘‘(A) provides that the board of trustees

2 serves as the named fiduciary required for plans

3 under section 402(a)(1) and serves in the ca4 pacity of a plan administrator (referred to in

5 section 3(16)(A));

6 ‘‘(B) provides that the sponsor of the plan

7 is to serve as plan sponsor (referred to in sec8 tion 3(16)(B)); and

9 ‘‘(C) incorporates the requirements of sec10 tion 806.

11 ‘‘(2) CONTRIBUTION RATES MUST BE NON12 DISCRIMINATORY.—

13 ‘‘(A) The contribution rates for any par14 ticipating small employer do not vary on the

15 basis of the claims experience of such employer

16 and do not vary on the basis of the type of

17 business or industry in which such employer is

18 engaged.

19 ‘‘(B) Nothing in this title or any other pro20 vision of law shall be construed to preclude an

21 association health plan, or a health insurance

22 issuer offering health insurance coverage in

23 connection with an association health plan,

24 from—
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1 ‘‘(i) setting contribution rates based

2 on the claims experience of the plan; or

3 ‘‘(ii) varying contribution rates for

4 small employers in a State to the extent

5 that such rates could vary using the same

6 methodology employed in such State for

7 regulating premium rates in the small

8 group market, subject to the requirements

9 of section 702(b) relating to contribution

10 rates.

11 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI12 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If

13 any benefit option under the plan does not consist

14 of health insurance coverage, the plan has as of the

15 beginning of the plan year not fewer than 1,000 par16 ticipants and beneficiaries.

17 ‘‘(4) MARKETING REQUIREMENTS.—

18 ‘‘(A) IN GENERAL.—If a benefit option

19 which consists of health insurance coverage is

20 offered under the plan, State-licensed insurance

21 agents shall be used to distribute to small em22 ployers coverage which does not consist of

23 health insurance coverage in a manner com24 parable to the manner in which such agents are

25 used to distribute health insurance coverage.
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1 ‘‘(B) STATE-LICENSED INSURANCE

2 AGENTS.—For purposes of subparagraph (A),

3 the term State-licensed insurance agents’ means

4 one or more agents who are licensed in a State

5 and are subject to the laws of such State relat6 ing to licensure, qualification, testing, examina7 tion, and continuing education of persons au8 thorized to offer, sell, or solicit health insurance

9 coverage in such State.

10 ‘‘(5) REGULATORY REQUIREMENTS.—Such

11 other requirements as the applicable authority may

12 prescribe by regulation as necessary to carry out the

13 purposes of this part.

14 ‘‘(b) HEALTH BENEFITS UNDER AN ASSOCIATION

15 HEALTH PLAN.—

16 ‘‘(1) EXAMPLES OF TYPES OF COVERAGE.—The

17 health benefits coverage made available through an

18 association health plan may include, but is not lim19 ited to, any of the following if it meets the other ap20 plicable requirements of this title:

21 ‘‘(A) Coverage through a health mainte22 nance organization.

23 ‘‘(B) Coverage in connection with a pre24 ferred provider organization.
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1 ‘‘(C) Coverage in connection with a li2 censed provider-sponsored organization.

3 ‘‘(D) Indemnity coverage through an insur4 ance company.

5 ‘‘(E) Coverage offered in connection with a

6 contribution into a medical savings account or

7 flexible spending account.

8 ‘‘(F) Coverage that includes a point-of9 service option.

10 ‘‘(G) Coverage offered by a community

11 health organization (as defined in section

12 330D(e) of the Public Health Service Act).

13 ‘‘(H) Any combination of such types of

14 coverage.

15 ‘‘(2) HEALTH INSURANCE COVERAGE OP16 TIONS.—

17 ‘‘(A) IN GENERAL.—An association health

18 plan shall include a minimum of 4 health insur19 ance coverage options. At least 1 option shall be

20 a non network option. At least 2 options shall

21 meet all applicable State benefit mandates.

22 ‘‘(B) MODEL BENEFITS PACKAGE.—The

23 Secretary in consultation with the National As24 sociation of Insurance Commissioners shall de25 velop a model benefits package for health insur-
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1 ance coverage not later than one year after the

2 date of the enactment of the Affordable Health

3 Care Act of 1999.

4 ‘‘(C) EXCEPTION TO GENERAL RULE.—An

5 association health plan may offer 2 options that

6 meet the requirements of the model benefits

7 package in lieu of the State benefit mandate of8 ferings required under subparagraph (A).

9 ‘‘(3) PERMITTING ASSOCIATION HEALTH PLANS

10 TO ADJUST DISTRIBUTIONS AMONG ISSUERS TO RE11 FLECT RELATIVE RISK OF ENROLLEES.—Nothing in

12 this section shall be construed as precluding an asso13 ciation health plan from providing for adjustments

14 in amounts distributed among the health insurance

15 issuers offering health benefits coverage through the

16 association health plan based on factors such as the

17 relative health care risk of members enrolled under

18 the coverage offered by the different issuers.

19 ‘‘(4) CONSTRUCTION.—Except as provided in

20 subparagraph (2), nothing in this part or any provi21 sion of State law (as defined in section 514(c)(1))

22 shall be construed to preclude an association health

23 plan, or a health insurance issuer offering health in24 surance coverage in connection with an association

25 health plan, from exercising its sole discretion in se-
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1 lecting the specific items and services consisting of

2 medical care to be included as benefits under such

3 plan or coverage, except (subject to section 514) in

4 the case of any law to the extent that it (1) prohibits

5 an exclusion of a specific disease from such cov6 erage, or (2) is not preempted under section

7 731(a)(1) with respect to matters governed by sec8 tion 711 or 712.

9 ‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS

10 FOR SOLVENCY FOR PLANS PROVIDING

11 HEALTH BENEFITS IN ADDITION TO HEALTH

12 INSURANCE COVERAGE.

13 ‘‘(a) IN GENERAL.—The requirements of this section

14 are met with respect to an association health plan if—

15 ‘‘(1) the benefits under the plan consist solely

16 of health insurance coverage; or

17 ‘‘(2) if the plan provides any additional benefit

18 options which do not consist of health insurance cov19 erage, the plan—

20 ‘‘(A) establishes and maintains reserves

21 with respect to such additional benefit options,

22 in amounts recommended by the qualified actu23 ary, consisting of—

24 ‘‘(i) a reserve sufficient for unearned

25 contributions;
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1 ‘‘(ii) a reserve sufficient for benefit li2 abilities which have been incurred, which

3 have not been satisfied, and for which risk

4 of loss has not yet been transferred, and

5 for expected administrative costs with re6 spect to such benefit liabilities;

7 ‘‘(iii) a reserve sufficient for any other

8 obligations of the plan; and

9 ‘‘(iv) a reserve sufficient for a margin

10 of error and other fluctuations, taking into

11 account the specific circumstances of the

12 plan; and

13 ‘‘(B) establishes and maintains aggregate

14 and specific excess/stop loss insurance and sol15 vency indemnification, with respect to such ad16 ditional benefit options for which risk of loss

17 has not yet been transferred, as follows:

18 ‘‘(i) The plan shall secure aggregate

19 excess/stop loss insurance for the plan with

20 an attachment point which is not greater

21 than 125 percent of expected gross annual

22 claims. The applicable authority may by

23 regulation provide for upward adjustments

24 in the amount of such percentage in speci25 fied circumstances in which the plan spe-
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1 cifically provides for and maintains re2 serves in excess of the amounts required

3 under subparagraph (A).

4 ‘‘(ii) The plan shall secure specific ex5 cess/stop loss insurance for the plan with

6 an attachment point which is at least equal

7 to an amount recommended by the plan’s

8 qualified actuary (but not more than

9 $200,000). The applicable authority may

10 by regulation provide for adjustments in

11 the amount of such insurance in specified

12 circumstances in which the plan specifically

13 provides for and maintains reserves in ex14 cess of the amounts required under sub15 paragraph (A).

16 ‘‘(iii) The plan shall secure indem17 nification insurance for any claims which

18 the plan is unable to satisfy by reason of

19 a plan termination.

20 Any regulations prescribed by the applicable au21 thority pursuant to clause (i) or (ii) of subpara22 graph (B) may allow for such adjustments in

23 the required levels of excess/stop loss insurance

24 as the qualified actuary may recommend, taking
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1 into account the specific circumstances of the

2 plan.

3 ‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS

4 RESERVES.—The requirements of this subsection are met

5 if the plan establishes and maintains surplus in an amount

6 at least equal to $2,000,000, reduced in accordance with

7 a scale, prescribed in regulations of the applicable author8 ity to an amount not less than $500,000, based on the

9 level of aggregate and specific excess/stop loss insurance

10 provided with respect to such plan.

11 ‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of

12 any association health plan described in subsection (a)(2),

13 the applicable authority may provide such additional re14 quirements relating to reserves and excess/stop loss insur15 ance as the applicable authority considers appropriate.

16 Such requirements may be provided, by regulation or oth17 erwise, with respect to any such plan or any class of such

18 plans.

19 ‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR20 ANCE.—The applicable authority may provide for adjust21 ments to the levels of reserves otherwise required under

22 subsections (a) and (b) with respect to any plan or class

23 of plans to take into account excess/stop loss insurance

24 provided with respect to such plan or plans.
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1 ‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The

2 applicable authority may permit an association health plan

3 described in subsection (a)(2) to substitute, for all or part

4 of the requirements of this section (except subsection

5 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar6 rangement, or other financial arrangement as the applica7 ble authority determines to be adequate to enable the plan

8 to fully meet all its financial obligations on a timely basis

9 and is otherwise no less protective of the interests of par10 ticipants and beneficiaries than the requirements for

11 which it is substituted. The applicable authority may take

12 into account, for purposes of this subsection, evidence pro13 vided by the plan or sponsor which demonstrates an as14 sumption of liability with respect to the plan. Such evi15 dence may be in the form of a contract of indemnification,

16 lien, bonding, insurance, letter of credit, recourse under

17 applicable terms of the plan in the form of assessments

18 of participating employers, security, or other financial ar19 rangement.

20 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

21 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.—

22 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO23 CIATION HEALTH PLAN FUND.—

24 ‘‘(A) IN GENERAL.—In the case of an as25 sociation health plan described in subsection
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1 (a)(2), the requirements of this subsection are

2 met if the plan makes payments into the Asso3 ciation Health Plan Fund under this subpara4 graph when they are due. Such payments shall

5 consist of annual payments in the amount of

6 $5,000, and, in addition to such annual pay7 ments, such supplemental payments as the Sec8 retary may determine to be necessary under

9 paragraph (2). Payments under this paragraph

10 are payable to the Fund at the time determined

11 by the Secretary. Initial payments are due in

12 advance of certification under this part. Pay13 ments shall continue to accrue until a plan’s as14 sets are distributed pursuant to a termination

15 procedure.

16 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

17 PAYMENTS.—If any payment is not made by a

18 plan when it is due, a late payment charge of

19 not more than 100 percent of the payment

20 which was not timely paid shall be payable by

21 the plan to the Fund.

22 ‘‘(C) CONTINUED DUTY OF THE SEC23 RETARY.—The Secretary shall not cease to

24 carry out the provisions of paragraph (2) on ac-
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1 count of the failure of a plan to pay any pay2 ment when due.

3 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

4 EXCESS/STOP LOSS INSURANCE COVERAGE AND IN5 DEMNIFICATION INSURANCE COVERAGE FOR CER6 TAIN PLANS.—In any case in which the applicable

7 authority determines that there is, or that there is

8 reason to believe that there will be: (A) a failure to

9 take necessary corrective actions under section

10 809(a) with respect to an association health plan de11 scribed in subsection (a)(2); or (B) a termination of

12 such a plan under section 809(b) or 810(b)(8) (and,

13 if the applicable authority is not the Secretary, cer14 tifies such determination to the Secretary), the Sec15 retary shall determine the amounts necessary to

16 make payments to an insurer (designated by the

17 Secretary) to maintain in force excess/stop loss in18 surance coverage or indemnification insurance cov19 erage for such plan, if the Secretary determines that

20 there is a reasonable expectation that, without such

21 payments, claims would not be satisfied by reason of

22 termination of such coverage. The Secretary shall, to

23 the extent provided in advance in appropriation

24 Acts, pay such amounts so determined to the insurer

25 designated by the Secretary.
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1 ‘‘(3) ASSOCIATION HEALTH PLAN FUND.—

2 ‘‘(A) IN GENERAL.—There is established

3 on the books of the Treasury a fund to be

4 known as the ‘Association Health Plan Fund’.

5 The Fund shall be available for making pay6 ments pursuant to paragraph (2). The Fund

7 shall be credited with payments received pursu8 ant to paragraph (1)(A), penalties received pur9 suant to paragraph (1)(B); and earnings on in10 vestments of amounts of the Fund under sub11 paragraph (B).

12 ‘‘(B) INVESTMENT.—Whenever the Sec13 retary determines that the moneys of the fund

14 are in excess of current needs, the Secretary

15 may request the investment of such amounts as

16 the Secretary determines advisable by the Sec17 retary of the Treasury in obligations issued or

18 guaranteed by the United States.

19 ‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes

20 of this section—

21 ‘‘(1) AGGREGATE EXCESS/STOP LOSS INSUR22 ANCE.—The term aggregate excess/stop loss insur23 ance’ means, in connection with an association

24 health plan, a contract—
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•HR 1136 IH

1 ‘‘(A) under which an insurer (meeting such

2 minimum standards as may be prescribed in

3 regulations of the applicable authority) provides

4 for payment to the plan with respect to aggre5 gate claims under the plan in excess of an

6 amount or amounts specified in such contract;

7 ‘‘(B) which is guaranteed renewable; and

8 ‘‘(C) which allows for payment of pre9 miums by any third party on behalf of the in10 sured plan.

11 ‘‘(2) SPECIFIC EXCESS/STOP LOSS INSUR12 ANCE.—The term ‘specific excess/stop loss insur13 ance’ means, in connection with an association

14 health plan, a contract—

15 ‘‘(A) under which an insurer (meeting such

16 minimum standards as may be prescribed in

17 regulations of the applicable authority) provides

18 for payment to the plan with respect to claims

19 under the plan in connection with a covered in20 dividual in excess of an amount or amounts

21 specified in such contract in connection with

22 such covered individual;

23 ‘‘(B) which is guaranteed renewable; and
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•HR 1136 IH

1 ‘‘(C) which allows for payment of pre2 miums by any third party on behalf of the in3 sured plan.

4 ‘‘(h) INDEMNIFICATION INSURANCE.—For purposes

5 of this section, the term ‘indemnification insurance’

6 means, in connection with an association health plan, a

7 contract—

8 ‘‘(1) under which an insurer (meeting such min9 imum standards as may be prescribed in regulations

10 of the applicable authority) provides for payment to

11 the plan with respect to claims under the plan which

12 the plan is unable to satisfy by reason of a termi13 nation pursuant to section 809(b) (relating to man14 datory termination);

15 ‘‘(2) which is guaranteed renewable and

16 noncancellable for any reason (except as may be pro17 vided in regulations of the applicable authority); and

18 ‘‘(3) which allows for payment of premiums by

19 any third party on behalf of the insured plan.

20 ‘‘(i) RESERVES.—For purposes of this section, the

21 term ‘reserves’ means, in connection with an association

22 health plan, plan assets which meet the fiduciary stand23 ards under part 4 and such additional requirements re24 garding liquidity as may be prescribed in regulations of

25 the applicable authority.
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1 ‘‘(j) REGULATIONS PRESCRIBED UNDER NEGO2 TIATED RULEMAKING.—The regulations under this sec3 tion shall be prescribed under negotiated rulemaking in

4 accordance with subchapter III of chapter 5 of title 5,

5 United States Code, except that, in establishing the nego6 tiated rulemaking committee for purposes of such rule7 making, the applicable authority shall include among per8 sons invited to membership on the committee at least one

9 of each of the following:

10 ‘‘(1) a representative of the National Associa11 tion of Insurance Commissioners;

12 ‘‘(2) a representative of the American Academy

13 of Actuaries;

14 ‘‘(3) a representative of the State governments,

15 or their interests;

16 ‘‘(4) a representative of existing self-insured ar17 rangements, or their interests;

18 ‘‘(5) a representative of associations of the type

19 referred to in section 801(b)(1), or their interests;

20 and

21 ‘‘(6) a representative of multiemployer plans

22 that are group health plans, or their interests.
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•HR 1136 IH

1 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE2 LATED REQUIREMENTS.

3 ‘‘(a) FILING FEE.—Under the procedure prescribed

4 pursuant to section 802(a), an association health plan

5 shall pay to the applicable authority at the time of filing

6 an application for certification under this part a filing fee

7 in the amount of $5,000, which shall be available in the

8 case of the Secretary, to the extent provided in appropria9 tion Acts, for the sole purpose of administering the certifi10 cation procedures applicable with respect to association

11 health plans.

12 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA13 TION FOR CERTIFICATION.—An application for certifi14 cation under this part meets the requirements of this sec15 tion only if it includes, in a manner and form prescribed

16 in regulations of the applicable authority, at least the fol17 lowing information:

18 ‘‘(1) IDENTIFYING INFORMATION.—The names

19 and addresses of—

20 ‘‘(A) the sponsor; and

21 ‘‘(B) the members of the board of trustees

22 of the plan.

23 ‘‘(2) STATES IN WHICH PLAN INTENDS TO DO

24 BUSINESS.—The States in which participants and

25 beneficiaries under the plan are to be located and
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•HR 1136 IH

1 the number of them expected to be located in each

2 such State.

3 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro4 vided by the board of trustees that the bonding re5 quirements of section 412 will be met as of the date

6 of the application or (if later) commencement of op7 erations.

8 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu9 ments governing the plan (including any bylaws and

10 trust agreements), the summary plan description,

11 and other material describing the benefits that will

12 be provided to participants and beneficiaries under

13 the plan.

14 ‘‘(5) AGREEMENTS WITH SERVICE PRO15 VIDERS.—A copy of any agreements between the

16 plan and contract administrators and other service

17 providers.

18 ‘‘(6) FUNDING REPORT.—In the case of asso19 ciation health plans providing benefits options in ad20 dition to health insurance coverage, a report setting

21 forth information with respect to such additional

22 benefit options determined as of a date within the

23 120-day period ending with the date of the applica24 tion, including the following:
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•HR 1136 IH

1 ‘‘(A) RESERVES.—A statement, certified

2 by the board of trustees of the plan, and a

3 statement of actuarial opinion, signed by a

4 qualified actuary, that all applicable require5 ments of section 806 are or will be met in ac6 cordance with regulations which the applicable

7 authority shall prescribe.

8 ‘‘(B) ADEQUACY OF CONTRIBUTION

9 RATES.—A statement of actuarial opinion,

10 signed by a qualified actuary, which sets forth

11 a description of the extent to which contribution

12 rates are adequate to provide for the payment

13 of all obligations and the maintenance of re14 quired reserves under the plan for the 12-

15 month period beginning with such date within

16 such 120-day period, taking into account the

17 expected coverage and experience of the plan. If

18 the contribution rates are not fully adequate,

19 the statement of actuarial opinion shall indicate

20 the extent to which the rates are inadequate

21 and the changes needed to ensure adequacy.

22 ‘‘(C) CURRENT AND PROJECTED VALUE OF

23 ASSETS AND LIABILITIES.—A statement of ac24 tuarial opinion signed by a qualified actuary,

25 which sets forth the current value of the assets
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•HR 1136 IH

1 and liabilities accumulated under the plan and

2 a projection of the assets, liabilities, income,

3 and expenses of the plan for the 12-month pe4 riod referred to in subparagraph (B). The in5 come statement shall identify separately the

6 plan’s administrative expenses and claims.

7 ‘‘(D) COSTS OF COVERAGE TO BE

8 CHARGED AND OTHER EXPENSES.—A state9 ment of the costs of coverage to be charged, in10 cluding an itemization of amounts for adminis11 tration, reserves, and other expenses associated

12 with the operation of the plan.

13 ‘‘(E) OTHER INFORMATION.—Any other

14 information which may be prescribed in regula15 tions of the applicable authority as necessary to

16 carry out the purposes of this part.

17 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

18 STATES.—A certification granted under this part to an

19 association health plan shall not be effective unless written

20 notice of such certification is filed with the applicable

21 State authority of each State in which at least 25 percent

22 of the participants and beneficiaries under the plan are

23 located. For purposes of this subsection, an individual

24 shall be considered to be located in the State in which a
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•HR 1136 IH

1 known address of such individual is located or in which

2 such individual is employed.

3 ‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case

4 of any association health plan certified under this part,

5 descriptions of material changes in any information which

6 was required to be submitted with the application for the

7 certification under this part shall be filed in such form

8 and manner as shall be prescribed in regulations of the

9 applicable authority. The applicable authority may require

10 by regulation prior notice of material changes with respect

11 to specified matters which might serve as the basis for

12 suspension or revocation of the certification.

13 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS14 SOCIATION HEALTH PLANS.—An association health plan

15 certified under this part which provides benefit options in

16 addition to health insurance coverage for such plan year

17 shall meet the requirements of section 103 by filing an

18 annual report under such section which shall include infor19 mation described in subsection (b)(6) with respect to the

20 plan year and, notwithstanding section 104(a)(1)(A), shall

21 be filed with the applicable authority not later than 90

22 days after the close of the plan year (or on such later date

23 as may be prescribed by the applicable authority).

24 ‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The

25 board of trustees of each association health plan which
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1 provides benefits options in addition to health insurance

2 coverage and which is applying for certification under this

3 part or is certified under this part shall engage, on behalf

4 of all participants and beneficiaries, a qualified actuary

5 who shall be responsible for the preparation of the mate6 rials comprising information necessary to be submitted by

7 a qualified actuary under this part. The qualified actuary

8 shall utilize such assumptions and techniques as are nec9 essary to enable such actuary to form an opinion as to

10 whether the contents of the matters reported under this

11 part—

12 ‘‘(1) are in the aggregate reasonably related to

13 the experience of the plan and to reasonable expecta14 tions; and

15 ‘‘(2) represent such actuary’s best estimate of

16 anticipated experience under the plan.

17 The opinion by the qualified actuary shall be made

18 with respect to, and shall be made a part of, the annual

19 report.

20 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER21 MINATION.

22 ‘‘Except as provided in section 809(b), an association

23 health plan which is or has been certified under this part

24 may terminate (upon or at any time after cessation of ac25 cruals in benefit liabilities) only if the board of trustees—
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1 ‘‘(1) not less than 60 days before the proposed

2 termination date, provides to the participants and

3 beneficiaries a written notice of intent to terminate

4 stating that such termination is intended and the

5 proposed termination date;

6 ‘‘(2) develops a plan for winding up the affairs

7 of the plan in connection with such termination in

8 a manner which will result in timely payment of all

9 benefits for which the plan is obligated; and

10 ‘‘(3) submits such plan in writing to the appli11 cable authority.

12 Actions required under this section shall be taken in such

13 form and manner as may be prescribed in regulations of

14 the applicable authority.

15 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI16 NATION.

17 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE18 SERVES.—An association health plan which is certified

19 under this part and which provides benefits other than

20 health insurance coverage shall continue to meet the re21 quirements of section 806, irrespective of whether such

22 certification continues in effect. The board of trustees of

23 such plan shall determine quarterly whether the require24 ments of section 806 are met. In any case in which the

25 board determines that there is reason to believe that there
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1 is or will be a failure to meet such requirements, or the

2 applicable authority makes such a determination and so

3 notifies the board, the board shall immediately notify the

4 qualified actuary engaged by the plan, and such actuary

5 shall, not later than the end of the next following month,

6 make such recommendations to the board for corrective

7 action as the actuary determines necessary to ensure com8 pliance with section 806. Not later than 30 days after re9 ceiving from the actuary recommendations for corrective

10 actions, the board shall notify the applicable authority (in

11 such form and manner as the applicable authority may

12 prescribe by regulation) of such recommendations of the

13 actuary for corrective action, together with a description

14 of the actions (if any) that the board has taken or plans

15 to take in response to such recommendations. The board

16 shall thereafter report to the applicable authority, in such

17 form and frequency as the applicable authority may speci18 fy to the board, regarding corrective action taken by the

19 board until the requirements of section 806 are met.

20 ‘‘(b) MANDATORY TERMINATION.—In any case in

21 which—

22 ‘‘(1) the applicable authority has been notified

23 under subsection (a) of a failure of an association

24 health plan which is or has been certified under this

25 part and is described in section 806(a)(2) to meet
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1 the requirements of section 806 and has not been

2 notified by the board of trustees of the plan that

3 corrective action has restored compliance with such

4 requirements; and

5 ‘‘(2) the applicable authority determines that

6 there is a reasonable expectation that the plan will

7 continue to fail to meet the requirements of section

8 806,

9 the board of trustees of the plan shall, at the direction

10 of the applicable authority, terminate the plan and, in the

11 course of the termination, take such actions as the appli12 cable authority may require, including satisfying any

13 claims referred to in section 806(a)(2)(B)(iii) and recov14 ering for the plan any liability under subsection

15 (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure

16 that the affairs of the plan will be, to the maximum extent

17 possible, wound up in a manner which will result in timely

18 provision of all benefits for which the plan is obligated.

19 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL20 VENT ASSOCIATION HEALTH PLANS PRO21 VIDING HEALTH BENEFITS IN ADDITION TO

22 HEALTH INSURANCE COVERAGE.

23 ‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR

24 INSOLVENT PLANS.—Whenever the Secretary determines

25 that an association health plan which is or has been cer-
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•HR 1136 IH

1 tified under this part and which is described in section

2 806(a)(2) will be unable to provide benefits when due or

3 is otherwise in a financially hazardous condition as defined

4 in regulations of such Secretary, the Secretary shall, upon

5 notice to the plan, apply to the appropriate United States

6 district court for appointment of the Secretary as trustee

7 to administer the plan for the duration of the insolvency.

8 The plan may appear as a party and other interested per9 sons may intervene in the proceedings at the discretion

10 of the court. The court shall appoint such Secretary trust11 ee if the court determines that the trusteeship is necessary

12 to protect the interests of the participants and bene13 ficiaries or providers of medical care or to avoid any un14 reasonable deterioration of the financial condition of the

15 plan. The trusteeship of such Secretary shall continue

16 until the conditions described in the first sentence of this

17 subsection are remedied or the plan is terminated.

18 ‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon

19 appointment as trustee under subsection (a), shall have

20 the power—

21 ‘‘(1) to do any act authorized by the plan, this

22 title, or other applicable provisions of law to be done

23 by the plan administrator or any trustee of the plan;
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1 ‘‘(2) to require the transfer of all (or any part)

2 of the assets and records of the plan to the Sec3 retary as trustee;

4 ‘‘(3) to invest any assets of the plan which the

5 Secretary holds in accordance with the provisions of

6 the plan, regulations of the Secretary, and applicable

7 provisions of law;

8 ‘‘(4) to require the sponsor, the plan adminis9 trator, any participating employer, and any employee

10 organization representing plan participants to fur11 nish any information with respect to the plan which

12 the Secretary as trustee may reasonably need in

13 order to administer the plan;

14 ‘‘(5) to collect for the plan any amounts due the

15 plan and to recover reasonable expenses of the trust16 eeship;

17 ‘‘(6) to commence, prosecute, or defend on be18 half of the plan any suit or proceeding involving the

19 plan;

20 ‘‘(7) to issue, publish, or file such notices, state21 ments, and reports as may be required under regula22 tions of the Secretary or by any order of the court;

23 ‘‘(8) to terminate the plan (or provide for its

24 termination in accordance with section 809(b)) and

25 liquidate the plan assets, to restore the plan to the
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1 responsibility of the sponsor, or to continue the

2 trusteeship;

3 ‘‘(9) to provide for the enrollment of plan par4 ticipants and beneficiaries under appropriate cov5 erage options; and

6 ‘‘(10) to do such other acts as may be nec7 essary to comply with this title or any order of the

8 court and to protect the interests of plan partici9 pants and beneficiaries and providers of medical

10 care.

11 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac12 ticable after the Secretary’s appointment as trustee, the

13 Secretary shall give notice of such appointment to—

14 ‘‘(1) the sponsor and plan administrator;

15 ‘‘(2) each participant;

16 ‘‘(3) each participating employer; and

17 ‘‘(4) if applicable, each employee organization

18 which, for purposes of collective bargaining, rep19 resents plan participants.

20 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in21 consistent with the provisions of this title, or as may be

22 otherwise ordered by the court, the Secretary, upon ap23 pointment as trustee under this section, shall be subject

24 to the same duties as those of a trustee under section 704
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1 of title 11, United States Code, and shall have the duties

2 of a fiduciary for purposes of this title.

3 ‘‘(e) OTHER PROCEEDINGS.—An application by the

4 Secretary under this subsection may be filed notwith5 standing the pendency in the same or any other court of

6 any bankruptcy, mortgage foreclosure, or equity receiver7 ship proceeding, or any proceeding to reorganize, conserve,

8 or liquidate such plan or its property, or any proceeding

9 to enforce a lien against property of the plan.

10 ‘‘(f) JURISDICTION OF COURT.—

11 ‘‘(1) IN GENERAL.—Upon the filing of an appli12 cation for the appointment as trustee or the issuance

13 of a decree under this section, the court to which the

14 application is made shall have exclusive jurisdiction

15 of the plan involved and its property wherever lo16 cated with the powers, to the extent consistent with

17 the purposes of this section, of a court of the United

18 States having jurisdiction over cases under chapter

19 11 of title 11, United States Code. Pending an adju20 dication under this section such court shall stay, and

21 upon appointment by it of the Secretary as trustee,

22 such court shall continue the stay of, any pending

23 mortgage foreclosure, equity receivership, or other

24 proceeding to reorganize, conserve, or liquidate the

25 plan, the sponsor, or property of such plan or spon-
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1 sor, and any other suit against any receiver, conser2 vator, or trustee of the plan, the sponsor, or prop3 erty of the plan or sponsor. Pending such adjudica4 tion and upon the appointment by it of the Sec5 retary as trustee, the court may stay any proceeding

6 to enforce a lien against property of the plan or the

7 sponsor or any other suit against the plan or the

8 sponsor.

9 ‘‘(2) VENUE.—An action under this section

10 may be brought in the judicial district where the

11 sponsor or the plan administrator resides or does

12 business or where any asset of the plan is situated.

13 A district court in which such action is brought may

14 issue process with respect to such action in any

15 other judicial district.

16 ‘‘(g) PERSONNEL.—In accordance with regulations of

17 the Secretary, the Secretary shall appoint, retain, and

18 compensate accountants, actuaries, and other professional

19 service personnel as may be necessary in connection with

20 the Secretary’s service as trustee under this section.

21 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY.

22 ‘‘(a) IN GENERAL.—Notwithstanding section 514, a

23 State may impose by law a contribution tax on an associa24 tion health plan described in section 806(a)(2).
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1 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec2 tion, the term ‘contribution tax’ imposed by a State on

3 an association health plan means any tax imposed by such

4 State if—

5 ‘‘(1) such tax is computed by applying a rate to

6 the amount of premiums or contributions, with re7 spect to individuals covered under the plan who are

8 residents of such State, which are received by the

9 plan from participating employers located in such

10 State or from such individuals;

11 ‘‘(2) the rate of such tax does not exceed the

12 rate of any tax imposed by such State on premiums

13 or contributions received by insurers or health main14 tenance organizations for health insurance coverage

15 offered in such State in connection with a group

16 health plan;

17 ‘‘(3) such tax is otherwise nondiscriminatory;

18 and

19 ‘‘(4) the amount of any such tax assessed on

20 the plan is reduced by the amount of any tax or as21 sessment otherwise imposed by the State on pre22 miums, contributions, or both received by insurers or

23 health maintenance organizations for health insur24 ance coverage, aggregate excess/stop loss insurance

25 (as defined in section 806(g)(1)), specific excess/stop
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1 loss insurance (as defined in section 806(g)(2)),

2 other insurance related to the provision of medical

3 care under the plan, or any combination thereof pro4 vided by such insurers or health maintenance organi5 zations in such State in connection with such plan.

6 ‘‘SEC. 812. SPECIAL RULES FOR CHURCH PLANS.

7 ‘‘(a) ELECTION FOR CHURCH PLANS.—Notwith8 standing section 4(b)(2), if a church, a convention or asso9 ciation of churches, or an organization described in section

10 3(33)(C)(i) maintains a church plan which is a group

11 health plan (as defined in section 733(a)(1)), and such

12 church, convention, association, or organization makes an

13 election with respect to such plan under this subsection

14 (in such form and manner as the Secretary may by regula15 tion prescribe), then the provisions of this section shall

16 apply to such plan, with respect to benefits provided under

17 such plan consisting of medical care, as if section 4(b)(2)

18 did not contain an exclusion for church plans. Nothing in

19 this subsection shall be construed to render any other sec20 tion of this title applicable to church plans, except to the

21 extent that such other section is incorporated by reference

22 in this section.

23 ‘‘(b) EFFECT OF ELECTION.—

24 ‘‘(1) PREEMPTION OF STATE INSURANCE LAWS

25 REGULATING COVERED CHURCH PLANS.—Subject to
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1 paragraphs (2) and (3), this section shall supersede

2 any and all State laws which regulate insurance in3 sofar as they may now or hereafter regulate church

4 plans to which this section applies or trusts estab5 lished under such church plans.

6 ‘‘(2) GENERAL STATE INSURANCE REGULATION

7 UNAFFECTED.—

8 ‘‘(A) IN GENERAL.—Except as provided in

9 subparagraph (B) and paragraph (3), nothing

10 in this section shall be construed to exempt or

11 relieve any person from any provision of State

12 law which regulates insurance.

13 ‘‘(B) CHURCH PLANS NOT TO BE DEEMED

14 INSURANCE COMPANIES OR INSURERS.—Neither

15 a church plan to which this section applies, nor

16 any trust established under such a church plan,

17 shall be deemed to be an insurance company or

18 other insurer or to be engaged in the business

19 of insurance for purposes of any State law pur20 porting to regulate insurance companies or in21 surance contracts.

22 ‘‘(3) PREEMPTION OF CERTAIN STATE LAWS

23 RELATING TO PREMIUM RATE REGULATION AND

24 BENEFIT MANDATES.—The provisions of subsections

25 (a)(2)(B) and (b) of section 805 shall apply with re-
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1 spect to a church plan to which this section applies

2 in the same manner and to the same extent as such

3 provisions apply with respect to association health

4 plans.

5 ‘‘(4) DEFINITIONS.—For purposes of this

6 subsection—

7 ‘‘(A) STATE LAW.—The term ‘State law’

8 includes all laws, decisions, rules, regulations,

9 or other State action having the effect of law,

10 of any State. A law of the United States appli11 cable only to the District of Columbia shall be

12 treated as a State law rather than a law of the

13 United States.

14 ‘‘(B) STATE.—The term ‘State’ includes a

15 State, any political subdivision thereof, or any

16 agency or instrumentality of either, which pur17 ports to regulate, directly or indirectly, the

18 terms and conditions of church plans covered by

19 this section.

20 ‘‘(c) REQUIREMENTS FOR COVERED CHURCH

21 PLANS.—

22 ‘‘(1) FIDUCIARY RULES AND EXCLUSIVE PUR23 POSE.—A fiduciary shall discharge his duties with

24 respect to a church plan to which this section

25 applies—
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1 ‘‘(A) for the exclusive purpose of:

2 ‘‘(i) providing benefits to participants

3 and their beneficiaries; and

4 ‘‘(ii) defraying reasonable expenses of

5 administering the plan;

6 ‘‘(B) with the care, skill, prudence and dili7 gence under the circumstances then prevailing

8 that a prudent man acting in a like capacity

9 and familiar with such matters would use in the

10 conduct of an enterprise of a like character and

11 with like aims; and

12 ‘‘(C) in accordance with the documents

13 and instruments governing the plan.

14 The requirements of this paragraph shall not be

15 treated as not satisfied solely because the plan as16 sets are commingled with other church assets, to the

17 extent that such plan assets are separately ac18 counted for.

19 ‘‘(2) CLAIMS PROCEDURE.—In accordance with

20 regulations of the Secretary, every church plan to

21 which this section applies shall—

22 ‘‘(A) provide adequate notice in writing to

23 any participant or beneficiary whose claim for

24 benefits under the plan has been denied, setting

25 forth the specific reasons for such denial, writ-
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1 ten in a manner calculated to be understood by

2 the participant;

3 ‘‘(B) afford a reasonable opportunity to

4 any participant whose claim for benefits has

5 been denied for a full and fair review by the ap6 propriate fiduciary of the decision denying the

7 claim; and

8 ‘‘(C) provide a written statement to each

9 participant describing the procedures estab10 lished pursuant to this paragraph.

11 ‘‘(3) ANNUAL STATEMENTS.—In accordance

12 with regulations of the Secretary, every church plan

13 to which this section applies shall file with the Sec14 retary an annual statement—

15 ‘‘(A) stating the names and addresses of

16 the plan and of the church, convention, or asso17 ciation maintaining the plan (and its principal

18 place of business);

19 ‘‘(B) certifying that it is a church plan to

20 which this section applies and that it complies

21 with the requirements of paragraphs (1) and

22 (2);

23 ‘‘(C) identifying the States in which par24 ticipants and beneficiaries under the plan are or
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1 likely will be located during the 1-year period

2 covered by the statement; and

3 ‘‘(D) containing a copy of a statement of

4 actuarial opinion signed by a qualified actuary

5 that the plan maintains capital, reserves, insur6 ance, other financial arrangements, or any com7 bination thereof adequate to enable the plan to

8 fully meet all of its financial obligations on a

9 timely basis.

10 ‘‘(4) DISCLOSURE.—At the time that the an11 nual statement is filed by a church plan with the

12 Secretary pursuant to paragraph (3), a copy of such

13 statement shall be made available by the Secretary

14 to the State insurance commissioner (or similar offi15 cial) of any State. The name of each church plan

16 and sponsoring organization filing an annual state17 ment in compliance with paragraph (3) shall be pub18 lished annually in the Federal Register.

19 ‘‘(d) ENFORCEMENT.—The Secretary may enforce

20 the provisions of this section in a manner consistent with

21 section 502, to the extent applicable with respect to ac22 tions under section 502(a)(5), and with section 3(33)(D),

23 except that, other than for the purpose of seeking a tem24 porary restraining order, a civil action may be brought

25 with respect to the plan’s failure to meet any requirement
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1 of this section only if the plan fails to correct its failure

2 within the correction period described in section 3(33)(D).

3 The other provisions of part 5 (except sections 501(a),

4 503, 512, 514, and 515) shall apply with respect to the

5 enforcement and administration of this section.

6 ‘‘(e) DEFINITIONS AND OTHER RULES.—For pur7 poses of this section—

8 ‘‘(1) IN GENERAL.—Except as otherwise pro9 vided in this section, any term used in this section

10 which is defined in any provision of this title shall

11 have the definition provided such term by such pro12 vision.

13 ‘‘(2) SEMINARY STUDENTS.—Seminary students

14 who are enrolled in an institution of higher learning

15 described in section 3(33)(C)(iv) and who are treat16 ed as participants under the terms of a church plan

17 to which this section applies shall be deemed to be

18 employees as defined in section 3(6) if the number

19 of such students constitutes an insignificant portion

20 of the total number of individuals who are treated

21 as participants under the terms of the plan.

22 ‘‘SEC. 813. DEFINITIONS AND RULES OF CONSTRUCTION.

23 ‘‘(a) DEFINITIONS.—For purposes of this part—

24 ‘‘(1) GROUP HEALTH PLAN.—The term ‘group

25 health plan’ has the meaning provided in section
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1 733(a)(1) (after applying subsection (b) of this sec2 tion).

3 ‘‘(2) MEDICAL CARE.—The term ‘medical care’

4 has the meaning provided in section 733(a)(2).

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

6 term ‘health insurance coverage’ has the meaning

7 provided in section 733(b)(1).

8 ‘‘(4) HEALTH INSURANCE ISSUER.—The term

9 ‘health insurance issuer’ has the meaning provided

10 in section 733(b)(2).

11 ‘‘(5) APPLICABLE AUTHORITY.—

12 ‘‘(A) IN GENERAL.—Except as provided in

13 subparagraph (B), the term ‘applicable author14 ity’ means, in connection with an association

15 health plan—

16 ‘‘(i) the State recognized pursuant to

17 subsection (c) of section 506 as the State

18 to which authority has been delegated in

19 connection with such plan; or

20 ‘‘(ii) if there is no State referred to in

21 clause (i), the Secretary.

22 ‘‘(B) EXCEPTIONS.—

23 ‘‘(i) JOINT AUTHORITIES.—Where

24 such term appears in section 808(3), sec25 tion 807(e) (in the first instance), section
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1 809(a) (in the second instance), section

2 809(a) (in the fourth instance), and sec3 tion 809(b)(1), such term means, in con4 nection with an association health plan, the

5 Secretary and the State referred to in sub6 paragraph (A)(i) (if any) in connection

7 with such plan.

8 ‘‘(ii) REGULATORY AUTHORITIES.—

9 Where such term appears in section 802(a)

10 (in the first instance), section 802(d), sec11 tion 802(e), section 803(d), section

12 805(a)(5), section 806(a)(2), section

13 806(b), section 806(c), section 806(d),

14 paragraphs (1)(A) and (2)(A) of section

15 806(g), section 806(h), section 806(i), sec16 tion 807(a) (in the second instance), sec17 tion 807(b), section 807(d), section 807(e)

18 (in the second instance), section 808 (in

19 the matter after paragraph (3)), and sec20 tion 809(a) (in the third instance), such

21 term means, in connection with an associa22 tion health plan, the Secretary.

23 ‘‘(6) HEALTH STATUS-RELATED FACTOR.—The

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

25 provided in section 733(d)(2).
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1 ‘‘(7) INDIVIDUAL MARKET.—

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

3 market’ means the market for health insurance

4 coverage offered to individuals other than in

5 connection with a group health plan.

6 ‘‘(B) TREATMENT OF VERY SMALL

7 GROUPS.—

8 ‘‘(i) IN GENERAL.—Subject to clause

9 (ii), such term includes coverage offered in

10 connection with a group health plan that

11 has fewer than 2 participants as current

12 employees or participants described in sec13 tion 732(d)(3) on the first day of the plan

14 year.

15 ‘‘(ii) STATE EXCEPTION.—Clause (i)

16 shall not apply in the case of health insur17 ance coverage offered in a State if such

18 State regulates the coverage described in

19 such clause in the same manner and to the

20 same extent as coverage in the small group

21 market (as defined in section 2791(e)(5) of

22 the Public Health Service Act) is regulated

23 by such State.

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

25 ‘participating employer’ means, in connection with
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1 an association health plan, any employer, if any indi2 vidual who is an employee of such employer, a part3 ner in such employer, or a self-employed individual

4 who is such employer (or any dependent, as defined

5 under the terms of the plan, of such individual) is

6 or was covered under such plan in connection with

7 the status of such individual as such an employee,

8 partner, or self-employed individual in relation to the

9 plan.

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

11 term ‘applicable State authority’ means, with respect

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

15 title XXVII of the Public Health Service Act for the

16 State involved with respect to such issuer.

17 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali18 fied actuary’ means an individual who is a member

19 of the American Academy of Actuaries or meets

20 such reasonable standards and qualifications as the

21 Secretary may provide by regulation.

22 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili23 ated member’ means, in connection with a sponsor,

24 a person eligible to be a member of the sponsor or,

25 in the case of a sponsor with member associations,
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1 a person who is a member, or is eligible to be a

2 member, of a member association.

3 ‘‘(12) LARGE EMPLOYER.—The term ‘large em4 ployer’ means, in connection with a group health

5 plan with respect to a plan year, an employer who

6 employed an average of at least 51 employees on

7 business days during the preceding calendar year

8 and who employs at least 2 employees on the first

9 day of the plan year.

10 ‘‘(13) SMALL EMPLOYER.—The term ‘small em11 ployer’ means, in connection with a group health

12 plan with respect to a plan year, an employer who

13 is not a large employer.

14 ‘‘(14) NETWORK COVERAGE.—The term ‘‘net15 work coverage’’ means, with respect to a group

16 health plan or health insurance coverage offered by

17 a health insurance issuer, health benefits coverage

18 that provides or arranges for the provision of health

19 care items and services to participants, beneficiaries,

20 or enrollees through participating health profes21 sionals and providers.

22 ‘‘(b) RULES OF CONSTRUCTION.—

23 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur24 poses of determining whether a plan, fund, or pro25 gram is an employee welfare benefit plan which is an
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1 association health plan, and for purposes of applying

2 this title in connection with such plan, fund, or pro3 gram so determined to be such an employee welfare

4 benefit plan—

5 ‘‘(A) in the case of a partnership, the term

6 ‘employer’ (as defined in section (3)(5)) in7 cludes the partnership in relation to the part8 ners, and the term ‘employee’ (as defined in

9 section (3)(6)) includes any partner in relation

10 to the partnership; and

11 ‘‘(B) in the case of a self-employed indi12 vidual, the term ‘employer’ (as defined in sec13 tion 3(5)) and the term ‘employee’ (as defined

14 in section 3(6)) shall include such individual.

15 ‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED

16 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the

17 case of any plan, fund, or program which was estab18 lished or is maintained for the purpose of providing

19 medical care (through the purchase of insurance or

20 otherwise) for employees (or their dependents) cov21 ered thereunder and which demonstrates to the Sec22 retary that all requirements for certification under

23 this part would be met with respect to such plan,

24 fund, or program if such plan, fund, or program

25 were a group health plan, such plan, fund, or pro-
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1 gram shall be treated for purposes of this title as an

2 employee welfare benefit plan on and after the date

3 of such demonstration.’’.

4 (b) CONFORMING AMENDMENTS TO PREEMPTION

5 RULES.—

6 (1) Section 514(b)(6) of such Act (29 U.S.C.

7 1144(b)(6)) is amended by adding at the end the

8 following new subparagraph:

9 ‘‘(E) The preceding subparagraphs of this

10 paragraph do not apply with respect to any

11 State law in the case of an association health

12 plan which is certified under part 8.’’.

13 (2) Section 514 of such Act (29 U.S.C. 1144)

14 is amended—

15 (A) in subsection (b)(4), by striking ‘‘Sub16 section (a)’’ and inserting ‘‘Subsections (a) and

17 (d)’’;

18 (B) in subsection (b)(5), by striking ‘‘sub19 section (a)’’ in subparagraph (A) and inserting

20 ‘‘subsection (a) of this section and subsections

21 (a)(2)(B) and (b) of section 805’’, and by strik22 ing ‘‘subsection (a)’’ in subparagraph (B) and

23 inserting ‘‘subsection (a) of this section or sub24 section (a)(2)(B) or (b) of section 805’’;
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1 (C) by redesignating subsection (d) as sub2 section (e); and

3 (D) by inserting after subsection (c) the

4 following new subsection:

5 ‘‘(d)(1) Except as provided in subsection (b)(4), the

6 provisions of this title shall supersede any and all State

7 laws insofar as they may now or hereafter preclude, or

8 have the effect of precluding, a health insurance issuer

9 from offering health insurance coverage in connection with

10 an association health plan which is certified under part

11 8.

12 ‘‘(2) Except as provided in paragraphs (4) and (5)

13 of subsection (b) of this section—

14 ‘‘(A) In any case in which health insurance cov15 erage of any policy type is offered under an associa16 tion health plan certified under part 8 to a partici17 pating employer operating in such State, the provi18 sions of this title shall supersede any and all laws

19 of such State insofar as they may preclude a health

20 insurance issuer from offering health insurance cov21 erage of the same policy type to other employers op22 erating in the State which are eligible for coverage

23 under such association health plan, whether or not

24 such other employers are participating employers in

25 such plan.
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1 ‘‘(B) In any case in which health insurance cov2 erage of any policy type is offered under an associa3 tion health plan in a State and the filing, with the

4 applicable State authority, of the policy form in con5 nection with such policy type is approved by such

6 State authority, the provisions of this title shall su7 persede any and all laws of any other State in which

8 health insurance coverage of such type is offered, in9 sofar as they may preclude, upon the filing in the

10 same form and manner of such policy form with the

11 applicable State authority in such other State, the

12 approval of the filing in such other State.

13 ‘‘(3) For additional provisions relating to association

14 health plans, see subsections (a)(2)(B) and (b) of section

15 805.

16 ‘‘(4) For purposes of this subsection, the term ‘asso17 ciation health plan’ has the meaning provided in section

18 801(a), and the terms ‘health insurance coverage’, ‘par19 ticipating employer’, and ‘health insurance issuer’ have

20 the meanings provided such terms in section 811, respec21 tively.’’.

22 (3) Section 514(b)(6)(A) of such Act (29

23 U.S.C. 1144(b)(6)(A)) is amended—

24 (A) in clause (i)(II), by striking ‘‘and’’ at

25 the end;
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1 (B) in clause (ii), by inserting and which

2 does not provide medical care (within the mean3 ing of ‘‘(section 733(a)(2)),’’ after ‘‘arrange4 ment,’’, and by striking ‘‘title.’’ and inserting

5 ‘‘title, and’’; and

6 (C) by adding at the end the following new

7 clause:

8 ‘‘(iii) subject to subparagraph (E), in the case

9 of any other employee welfare benefit plan which is

10 a multiple employer welfare arrangement and which

11 provides medical care (within the meaning of section

12 733(a)(2)), any law of any State which regulates in13 surance may apply.’’.

14 (4) Section 514(e) of such Act (as redesignated

15 by paragraph (2)(C)) is amended—

16 (A) by striking ‘‘Nothing’’ and inserting

17 ‘‘(1) Except as provided in paragraph (2), noth18 ing’’; and

19 (B) by adding at the end the following new

20 paragraph:

21 ‘‘(2) Nothing in any other provision of law enacted

22 on or after the date of the enactment of the Affordable

23 Health Care Act of 1999 shall be construed to alter,

24 amend, modify, invalidate, impair, or supersede any provi-
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1 sion of this title, except by specific cross-reference to the

2 affected section.’’.

3 (c) PLAN SPONSOR.—Section 3(16)(B) of such Act

4 (29 U.S.C. 102(16)(B)) is amended by adding at the end

5 the following new sentence: ‘‘Such term also includes a

6 person serving as the sponsor of an association health plan

7 under part 8.’’.

8 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE9 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

10 UNDER ASSOCIATION HEALTH PLANS.—Section 102(b)

11 of such Act (29 U.S.C. 102(b)) is amended by adding at

12 the end the following: ‘‘An association health plan shall

13 include in its summary plan description, in connection

14 with each benefit option, a description of the form of sol15 vency or guarantee fund protection secured pursuant to

16 this Act or applicable State law, if any.’’.

17 (e) SAVINGS CLAUSE.—Section 731(c) of such Act is

18 amended by inserting ‘‘or part 8’’ after ‘‘this part’’.

19 (f) CLERICAL AMENDMENT.—The table of contents

20 in section 1 of the Employee Retirement Income Security

21 Act of 1974 is amended by inserting after the item relat22 ing 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.
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‘‘Sec. 805. Other requirements relating to plan documents, contribution rates,

and benefit options.

‘‘Sec. 806. Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to health insurance coverage.

‘‘Sec. 807. Requirements for application and related requirements.

‘‘Sec. 808. Notice requirements for voluntary termination.

‘‘Sec. 809. Corrective actions and mandatory termination.

‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health plans

providing health benefits in addition to health insurance coverage.

‘‘Sec. 811. State assessment authority.

‘‘Sec. 812. Special rules for church plans.

‘‘Sec. 813. Definitions and rules of construction.’’.

1 SEC. 202. CLARIFICATION OF TREATMENT OF SINGLE EM2 PLOYER ARRANGEMENTS.

3 Section 3(40)(B) of the Employee Retirement Income

4 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is

5 amended—

6 (1) in clause (i), by inserting ‘‘for any plan year

7 of any such plan, or any fiscal year of any such

8 other arrangement;’’ after ‘‘single employer’’, and by

9 inserting ‘‘during such year or at any time during

10 the preceding 1-year period’’ after ‘‘control group’’;

11 (2) in clause (iii)—

12 (A) by striking ‘‘common control shall not

13 be based on an interest of less than 25 percent’’

14 and inserting ‘‘an interest of greater than 25

15 percent may not be required as the minimum

16 interest necessary for common control’’; and

17 (B) by striking ‘‘similar to’’ and inserting

18 ‘‘consistent and coextensive with’’;
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1 (3) by redesignating clauses (iv) and (v) as

2 clauses (v) and (vi), respectively; and

3 (4) by inserting after clause (iii) the following

4 new clause:

5 ‘‘(iv) in determining, after the application of

6 clause (i), whether benefits are provided to employ7 ees of two or more employers, the arrangement shall

8 be treated as having only one participating employer

9 if, after the application of clause (i), the number of

10 individuals who are employees and former employees

11 of any one participating employer and who are cov12 ered under the arrangement is greater than 75 per13 cent of the aggregate number of all individuals who

14 are employees or former employees of participating

15 employers and who are covered under the arrange16 ment;’’.

17 SEC. 203. CLARIFICATION OF TREATMENT OF CERTAIN

18 COLLECTIVELY BARGAINED ARRANGE19 MENTS.

20 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em21 ployee Retirement Income Security Act of 1974 (29

22 U.S.C. 1002(40)(A)(i)) is amended to read as follows:

23 ‘‘(i)(I) under or pursuant to one or more collec24 tive bargaining agreements which are reached pursu25 ant to collective bargaining described in section 8(d)
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1 of the National Labor Relations Act (29 U.S.C.

2 158(d)) or paragraph Fourth of section 2 of the

3 Railway Labor Act (45 U.S.C. 152, paragraph

4 Fourth) or which are reached pursuant to labor5 management negotiations under similar provisions of

6 State public employee relations laws, and (II) in ac7 cordance with subparagraphs (C), (D), and (E);’’.

8 (b) LIMITATIONS.—Section 3(40) of such Act (29

9 U.S.C. 1002(40)) is amended by adding at the end the

10 following new subparagraphs:

11 ‘‘(C) For purposes of subparagraph (A)(i)(II), a plan

12 or other arrangement shall be treated as established or

13 maintained in accordance with this subparagraph only if

14 the following requirements are met:

15 ‘‘(i) The plan or other arrangement, and the

16 employee organization or any other entity sponsoring

17 the plan or other arrangement, do not—

18 ‘‘(I) utilize the services of any licensed in19 surance agent or broker for soliciting or enroll20 ing employers or individuals as participating

21 employers or covered individuals under the plan

22 or other arrangement; or

23 ‘‘(II) pay a commission or any other type

24 of compensation to a person, other than a full

25 time employee of the employee organization (or
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1 a member of the organization to the extent pro2 vided in regulations of the Secretary), that is

3 related either to the volume or number of em4 ployers or individuals solicited or enrolled as

5 participating employers or covered individuals

6 under the plan or other arrangement, or to the

7 dollar amount or size of the contributions made

8 by participating employers or covered individ9 uals to the plan or other arrangement;

10 except to the extent that the services used by the

11 plan, arrangement, organization, or other entity con12 sist solely of preparation of documents necessary for

13 compliance with the reporting and disclosure re14 quirements of part 1 or administrative, investment,

15 or consulting services unrelated to solicitation or en16 rollment of covered individuals.

17 ‘‘(ii) As of the end of the preceding plan year,

18 the number of covered individuals under the plan or

19 other arrangement who are identified to the plan or

20 arrangement and who are neither—

21 ‘‘(I) employed within a bargaining unit

22 covered by any of the collective bargaining

23 agreements with a participating employer (nor

24 covered on the basis of an individual’s employ25 ment in such a bargaining unit); nor
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1 ‘‘(II) present employees (or former employ2 ees who were covered while employed) of the

3 sponsoring employee organization, of an em4 ployer who is or was a party to any of the col5 lective bargaining agreements, or of the plan or

6 other arrangement or a related plan or arrange7 ment (nor covered on the basis of such present

8 or former employment);

9 does not exceed 15 percent of the total number of

10 individuals who are covered under the plan or ar11 rangement and who are present or former employees

12 who are or were covered under the plan or arrange13 ment pursuant to a collective bargaining agreement

14 with a participating employer.

15 ‘‘(iii) The employee organization or other entity

16 sponsoring the plan or other arrangement certifies

17 to the Secretary each year, in a form and manner

18 which shall be prescribed in regulations of the Sec19 retary that the plan or other arrangement meets the

20 requirements of clauses (i) and (ii).

21 ‘‘(D) For purposes of subparagraph (A)(i)(II), a plan

22 or arrangement shall be treated as established or main23 tained in accordance with this subparagraph only if—
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1 ‘‘(i) all of the benefits provided under the plan

2 or arrangement consist of health insurance coverage;

3 or

4 ‘‘(ii)(I) the plan or arrangement is a multiem5 ployer plan; and

6 ‘‘(II) the requirements of clause (B) of the pro7 viso to clause (5) of section 302(c) of the Labor

8 Management Relations Act, 1947 (29 U.S.C.

9 186(c)) are met with respect to such plan or other

10 arrangement.

11 ‘‘(E) For purposes of subparagraph (A)(i)(II), a plan

12 or arrangement shall be treated as established or main13 tained in accordance with this subparagraph only if the

14 employee organization or other entity sponsoring the plan

15 or arrangement—

16 ‘‘(i) has been in existence for at least 3 years

17 or is affiliated with another employee organization

18 which has been in existence for at least 3 years; or

19 ‘‘(ii) demonstrates to the satisfaction of the

20 Secretary that the requirements of subparagraphs

21 (C) and (D) are met with respect to the plan or

22 other arrangement.’’.

23 (c) CONFORMING AMENDMENTS TO DEFINITIONS OF

24 PARTICIPANT AND BENEFICIARY.—Section 3(7) of such

25 Act (29 U.S.C. 1002(7)) is amended by adding at the end
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1 the following new sentence: ‘‘Such term includes an indi2 vidual who is a covered individual described in paragraph

3 (40)(C)(ii).’’.

4 SEC. 204. ENFORCEMENT PROVISIONS RELATING TO ASSO5 CIATION HEALTH PLANS.

6 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

7 MISREPRESENTATIONS.—Section 501 of the Employee

8 Retirement Income Security Act of 1974 (29 U.S.C. 1131)

9 is amended—

10 (1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and

11 (2) by adding at the end the following new sub12 section:

13 ‘‘(b) Any person who, either willfully or with willful

14 blindness, falsely represents, to any employee, any employ15 ee’s beneficiary, any employer, the Secretary, or any State,

16 a plan or other arrangement established or maintained for

17 the purpose of offering or providing any benefit described

18 in section 3(1) to employees or their beneficiaries as—

19 ‘‘(1) being an association health plan which has

20 been certified under part 8;

21 ‘‘(2) having been established or maintained

22 under or pursuant to one or more collective bar23 gaining agreements which are reached pursuant to

24 collective bargaining described in section 8(d) of the

25 National Labor Relations Act (29 U.S.C. 158(d)) or
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1 paragraph Fourth of section 2 of the Railway Labor

2 Act (45 U.S.C. 152, paragraph Fourth) or which are

3 reached pursuant to labor-management negotiations

4 under similar provisions of State public employee re5 lations laws; or

6 ‘‘(3) being a plan or arrangement with respect

7 to which the requirements of subparagraph (C), (D),

8 or (E) of section 3(40) are met;

9 shall, upon conviction, be imprisoned not more than 5

10 years, be fined under title 18, United States Code, or

11 both.’’.

12 (b) CEASE ACTIVITIES ORDERS.—Section 502 of

13 such Act (29 U.S.C. 1132) is amended by adding at the

14 end the following new subsection:

15 ‘‘(n)(1) Subject to paragraph (2), upon application

16 by the Secretary showing the operation, promotion, or

17 marketing of an association health plan (or similar ar18 rangement providing benefits consisting of medical care

19 (as defined in section 733(a)(2))) that—

20 ‘‘(A) is not certified under part 8, is subject

21 under section 514(b)(6) to the insurance laws of any

22 State in which the plan or arrangement offers or

23 provides benefits, and is not licensed, registered, or

24 otherwise approved under the insurance laws of such

25 State; or
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1 ‘‘(B) is an association health plan certified

2 under part 8 and is not operating in accordance with

3 the requirements under part 8 for such certification,

4 a district court of the United States shall enter an order

5 requiring that the plan or arrangement cease activities.

6 ‘‘(2) Paragraph (1) shall not apply in the case of an

7 association health plan or other arrangement if the plan

8 or arrangement shows that—

9 ‘‘(A) all benefits under it referred to in para10 graph (1) consist of health insurance coverage; and

11 ‘‘(B) with respect to each State in which the

12 plan or arrangement offers or provides benefits, the

13 plan or arrangement is operating in accordance with

14 applicable State laws that are not superseded under

15 section 514.

16 ‘‘(3) The court may grant such additional equitable

17 relief, including any relief available under this title, as it

18 deems necessary to protect the interests of the public and

19 of persons having claims for benefits against the plan.’’.

20 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

21 Section 503 of such Act (29 U.S.C. 1133) (as amended

22 by title I) is amended by adding at the end the following

23 new subsection:

24 ‘‘(c) ASSOCIATION HEALTH PLANS.—The terms of

25 each association health plan which is or has been certified
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1 under part 8 shall require the board of trustees or the

2 named fiduciary (as applicable) to ensure that the require3 ments of this section are met in connection with claims

4 filed under the plan.’’.

5 SEC. 205. COOPERATION BETWEEN FEDERAL AND STATE

6 AUTHORITIES.

7 Section 506 of the Employee Retirement Income Se8 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

9 at the end the following new subsection:

10 ‘‘(c) RESPONSIBILITY OF STATES WITH RESPECT TO

11 ASSOCIATION HEALTH PLANS.—

12 ‘‘(1) AGREEMENTS WITH STATES.—A State

13 may enter into an agreement with the Secretary for

14 delegation to the State of some or all of—

15 ‘‘(A) the Secretary’s authority under sec16 tions 502 and 504 to enforce the requirements

17 for certification under part 8;

18 ‘‘(B) the Secretary’s authority to certify

19 association health plans under part 8 in accord20 ance with regulations of the Secretary applica21 ble to certification under part 8; or

22 ‘‘(C) any combination of the Secretary’s

23 authority authorized to be delegated under sub24 paragraphs (A) and (B).
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1 ‘‘(2) DELEGATIONS.—Any department, agency,

2 or instrumentality of a State to which authority is

3 delegated pursuant to an agreement entered into

4 under this paragraph may, if authorized under State

5 law and to the extent consistent with such agree6 ment, exercise the powers of the Secretary under

7 this title which relate to such authority.

8 ‘‘(3) RECOGNITION OF PRIMARY DOMICILE

9 STATE.—In entering into any agreement with a

10 State under subparagraph (A), the Secretary shall

11 ensure that, as a result of such agreement and all

12 other agreements entered into under subparagraph

13 (A), only one State will be recognized, with respect

14 to any particular association health plan, as the

15 State to which all authority has been delegated pur16 suant to such agreements in connection with such

17 plan. In carrying out this paragraph, the Secretary

18 shall take into account the places of residence of the

19 participants and beneficiaries under the plan and the

20 State in which the trust is maintained.’’.

21 SEC. 206. EFFECTIVE DATE AND TRANSITIONAL AND

22 OTHER RULES.

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

24 sections 201, 204, and 205 shall take effect on January

25 1, 2000. The amendments made by sections 202 and 203
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1 shall take effect on the date of the enactment of this Act.

2 The Secretary of Labor shall first issue all regulations

3 necessary to carry out the amendments made by this sub4 title before January 1, 2000.

5 (b) EXCEPTION.—Section 801(a)(2) of the Employee

6 Retirement Income Security Act of 1974 (added by section

7 1302) does not apply in connection with an association

8 health plan (certified under part 8 of subtitle B of title

9 I of such Act) existing on April 1, 1997, if no benefits

10 provided thereunder as of the date of the enactment of

11 this Act consist of health insurance coverage (as defined

12 in section 733(b)(1) of such Act).

13 (c) TREATMENT OF CERTAIN EXISTING HEALTH

14 BENEFITS PROGRAMS.—

15 (1) IN GENERAL.—In any case in which, as of

16 the date of the enactment of this Act, an arrange17 ment is maintained in a State for the purpose of

18 providing benefits consisting of medical care for the

19 employees and beneficiaries of its participating em20 ployers, at least 200 participating employers make

21 contributions to such arrangement, such arrange22 ment has been in existence for at least 10 years, and

23 such arrangement is licensed under the laws of one

24 or more States to provide such benefits to its par25 ticipating employers, upon the filing with the appli-
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1 cable authority (as defined in section 813(a)(5) of

2 the Employee Retirement Income Security Act of

3 1974 (as amended by this Act)) by the arrangement

4 of an application for certification of the arrangement

5 under part 8 of subtitle B of title I of such Act—

6 (A) such arrangement shall be deemed to

7 be a group health plan for purposes of title I

8 of such Act;

9 (B) the requirements of sections 801(a)(1)

10 and 803(a)(1) of the Employee Retirement In11 come Security Act of 1974 shall be deemed met

12 with respect to such arrangement;

13 (C) the requirements of section 803(b) of

14 such Act shall be deemed met, if the arrange15 ment is operated by a board of directors

16 which—

17 (i) is elected by the participating em18 ployers, with each employer having one

19 vote; and

20 (ii) has complete fiscal control over

21 the arrangement and which is responsible

22 for all operations of the arrangement;

23 (D) the requirements of section 804(a) of

24 such Act shall be deemed met with respect to

25 such arrangement; and
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1 (E) the arrangement may be certified by

2 any applicable authority with respect to its op3 erations in any State only if it operates in such

4 State on the date of certification.

5 The provisions of this subsection shall cease to apply

6 with respect to any such arrangement at such time

7 after the date of the enactment of this Act as the

8 applicable requirements of this subsection are not

9 met with respect to such arrangement.

10 (2) DEFINITIONS.—For purposes of this sub11 section, the terms group ‘‘health plan’’, ‘‘medical

12 care’’, and ‘‘participating employer’’ shall have the

13 meanings provided in section 813 of the Employee

14 Retirement Income Security Act of 1974, except

15 that the reference in paragraph (7) of such section

16 to an ‘‘association health plan’’ shall be deemed a

17 reference to an arrangement referred to in this sub18 section.

19 (d) PILOT PROGRAM FOR SELF-INSURED ASSOCIA20 TION HEALTH PLANS.—

21 (1) IN GENERAL.—During the pilot program

22 period, association health plans which offer benefit

23 options which do not consist of health insurance cov24 erage may be certified under part 8 of subtitle B of

25 title I of the Employee Retirement Income Security
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1 Act of 1974 only if such plans consist of the fol2 lowing:

3 (A) plans which offered such coverage on

4 the date of the enactment of this Act;

5 (B) plans under which the sponsor does

6 not restrict membership to one or more trades

7 and businesses or industries and whose eligible

8 participating employers represent a broad cross9 section of trades and businesses or industries;

10 or

11 (C) plans whose eligible participating em12 ployers represent one or more trades or busi13 nesses, or one or more industries, which have

14 been indicated as having average or above-aver15 age health insurance risk or health claims expe16 rience by reason of State rate filings, denials of

17 coverage, proposed premium rate levels, and

18 other means demonstrated by such plans in ac19 cordance with regulations which the Secretary

20 shall prescribe, including (but not limited to)

21 the following: agriculture; automobile dealer22 ships; barbering and cosmetology; child care;

23 construction; dance, theatrical, and orchestra

24 productions; disinfecting and pest control; eat25 ing and drinking establishments; fishing; hos-
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1 pitals; labor organizations; logging; manufac2 turing (metals); mining; medical and dental

3 practices; medical laboratories; sanitary serv4 ices; transportation (local and freight); and

5 warehousing.

6 (2) PILOT PROGRAM PERIOD.—For purposes of

7 this subsection, the term ‘‘pilot program period’’

8 means the 5-year period beginning on January 1,

9 2000.

10 TITLE III—PROVIDING AFFORD11 ABLE CARE BY ALLOWING

12 HEALTH CARE COVERAGE

13 CREDITS TO INDIVIDUALS.

14 SEC. 301. REFUNDABLE CREDIT FOR PROVIDERS OF QUALI15 FIED HEALTH COVERAGE.

16 (a) IN GENERAL.—Subpart C of part IV of sub17 chapter A of chapter 1 of the Internal Revenue Code of

18 1986 (relating to refundable credits) is amended by redes19 ignating section 35 as section 36 and by inserting after

20 section 34 the following new section:

21 ‘‘SEC. 35. CREDIT TO PROVIDERS OF QUALIFIED HEALTH

22 COVERAGE.

23 ‘‘(a) GENERAL RULE.—Each eligible individual shall

24 be allowed a credit against the tax imposed by this subtitle

25 for the purchase of qualified health coverage. Such indi-
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1 vidual may designate a qualified health coverage provider

2 to administer the credit.

3 ‘‘(b) APPLICABLE CREDIT AMOUNT.—For purposes

4 of this section—

5 ‘‘(1) IN GENERAL.—The applicable credit

amount is 1 6 ⁄12 of the annual credit amount for each

7 month that the individual is covered by qualified

8 health coverage provided by the taxpayer.

9 ‘‘(2) ANNUAL CREDIT AMOUNT.—For purposes

10 of paragraph (1)—

11 ‘‘(A) IN GENERAL.—Except as provided in

12 subparagraph (B), the annual credit amount

13 is—

14 ‘‘(i) $1,200 in the case of an indi15 vidual who has attained age 18 as of the

16 beginning of the calendar year in which the

17 taxable year of the taxpayer ends, and

18 ‘‘(ii) $600 for an individual not de19 scribed in clause (i).

20 Such credit shall not exceed $3,600 for any in21 dividual policy.

22 ‘‘(B) INDIVIDUALS ELIGIBLE TO PARTICI23 PATE IN SUBSIDIZED EMPLOYER PLANS.—In

24 the case of an individual who is eligible for any
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1 month to participate in any subsidized health

2 plan maintained—

3 ‘‘(i) by any employer of such indi4 vidual or such individual’s spouse, or

5 ‘‘(ii) in the case of an individual who

6 is a dependent of another individual, by

7 any employer of such other individual or

8 such other individual’s spouse,

9 subparagraph (A) shall be applied by sub10 stituting ‘$400’ for ‘$1,200’, by substituting

11 ‘$200’ for ‘$600’, and by substituting ‘$1,200’

12 for ‘$3,600’.

13 ‘‘(3) CREDIT LIMITED TO AMOUNT OF PRE14 MIUMS.—The applicable credit amount for any indi15 vidual for any month shall not exceed the amount of

16 premiums that such individual would (but for this

17 section) be required to pay for the coverage for such

18 month.

19 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this

20 section—

21 ‘‘(1) IN GENERAL.—The term ‘eligible indi22 vidual’ means any individual who is a citizen of the

23 United States or who is lawfully residing in the

24 United States.
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1 ‘‘(2) EXCEPTION FOR INDIVIDUALS COVERED

2 UNDER CERTAIN OTHER HEALTH PLANS.—Such

3 term shall not include any individual for any month

4 who is covered for such month under—

5 ‘‘(A) title XVIII of the Social Security Act,

6 ‘‘(B) chapter 55 of title 10, United States

7 Code,

8 ‘‘(C) chapter 17 of title 38, United States

9 Code, or

10 ‘‘(D) the Indian Health Care Improvement

11 Act.

12 ‘‘(d) QUALIFIED HEALTH COVERAGE.—For purposes

13 of this section, the term ‘qualified health coverage’ means

14 coverage as defined in section 9832(b), excluding coverage

15 defined in section 9832(c).

16 ‘‘(e) QUALIFIED HEALTH COVERAGE PROVIDER.—

17 For purposes of this section, the term ‘qualified health

18 coverage provider’ means—

19 ‘‘(1) in the case of coverage provided to an em20 ployee by a plan maintained by his employer, the

21 employer, and

22 ‘‘(2) in any other case, the insurer providing

23 the coverage.

24 ‘‘(f) COVERAGE FOR MONTH.—An individual shall be

25 treated as having a particular coverage for a month if the
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1 individual has such coverage as of the first day of such

2 month.

3 ‘‘(g) REPORTING REQUIREMENT.—The Secretary

4 shall develop any reporting and filing requirements nec5 essary to ensure proper administration of this section.’’

6 (b) TERMINATION OF DEDUCTION FOR HEALTH IN7 SURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.—

8 Section 162(l) of such Code is amended by adding at the

9 end the following new paragraph:

10 ‘‘(6) TERMINATION OF DEDUCTION FOR

11 HEALTH INSURANCE.—In the case of taxable years

12 beginning after December 31, 1999, this subsection

13 shall only apply to amounts paid for qualified long14 term care insurance contracts.’’

15 (c) TECHNICAL AMENDMENTS.—

16 (1) Paragraph (2) of section 1324(b) of title

17 31, United States Code, is amended by inserting be18 fore the period ‘‘or from section 35 of such Code’’.

19 (2) The table of sections for subpart C of part

20 IV of subchapter A of chapter 1 of such Code is

21 amended by striking the last item and inserting the

22 following new items:

‘‘Sec. 35. Credit to providers of qualified health coverage.

‘‘Sec. 36. Overpayments of tax.’’
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1999.

4 TITLE IV—PROVIDING AFFORD5 ABLE CARE THROUGH MED6 ICAL SAVINGS ACCOUNTS.

7 SEC. 401. ENHANCEMENT OF AVAILABILITY OF MEDICAL

8 SAVINGS ACCOUNTS.

9 (a) REPEAL OF LIMITATIONS ON NUMBER OF MED10 ICAL SAVINGS ACCOUNTS.—

11 (1) IN GENERAL.—Subsections (i) and (j) of

12 section 220 of the Internal Revenue Code of 1986

13 are hereby repealed.

14 (2) CONFORMING AMENDMENT.—Paragraph (1)

15 of section 220(c) of such Code is amended by strik16 ing subparagraph (D).

17 (b) ALL EMPLOYERS MAY OFFER MEDICAL SAVINGS

18 ACCOUNTS.—

19 (1) IN GENERAL.—Subclause (I) of section

20 220(c)(1)(A)(iii) of such Code (defining eligible indi21 vidual) is amended by striking ‘‘and such employer

22 is a small employer’’.

23 (2) CONFORMING AMENDMENTS.—
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1 (A) Paragraph (1) of section 220(c) of

2 such Code is amended by striking subparagraph

3 (C).

4 (B) Subsection (c) of section 220 of such

5 Code is amended by striking paragraph (4) and

6 by redesignating paragraph (5) as paragraph

7 (4).

8 (c) INCREASE IN AMOUNT OF DEDUCTION ALLOWED

9 FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.—

10 (1) IN GENERAL.—Paragraph (2) of section

11 220(b) of such Code is amended to read as follows:

12 ‘‘(2) MONTHLY LIMITATION.—The monthly limitation for any month is the amount equal to 1 13 ⁄12 of

14 the annual deductible (as of the first day of such

15 month) of the individual’s coverage under the high

16 deductible health plan.’’.

17 (2) CONFORMING AMENDMENT.—Clause (ii) of

18 section 220(d)(1)(A) of such Code is amended by

19 striking ‘‘75 percent of’’.

20 (d) BOTH EMPLOYERS AND EMPLOYEES MAY CON21 TRIBUTE TO MEDICAL SAVINGS ACCOUNTS.—Paragraph

22 (5) of section 220(b) of such Code is amended to read

23 as follows:

24 ‘‘(5) COORDINATION WITH EXCLUSION FOR EM25 PLOYER CONTRIBUTIONS.—The limitation which
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1 would (but for this paragraph) apply under this sub2 section to an individual for any taxable year shall be

3 reduced (but not below zero) by the amount which

4 would (but for section 106(b)) be includible in the

5 individual’s gross income for such taxable year.’’.

6 (e) REDUCTION OF PERMITTED DEDUCTIBLES

7 UNDER HIGH DEDUCTIBLE HEALTH PLANS.—

8 (1) IN GENERAL.—Subparagraph (A) of section

9 220(c)(2) of such Code (defining high deductible

10 health plan) is amended—

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

12 inserting ‘‘$1,000’’, and

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

14 and inserting ‘‘$2,000’’.

15 (2) CONFORMING AMENDMENT.—Subsection (g)

16 of section 220 of such Code is amended—

17 (A) in the matter preceding paragraph (1),

18 by striking ‘‘1998’’ and inserting ‘‘2000’’, and

19 (B) in paragraph (2), by striking ‘‘1997’’

20 and inserting ‘‘1999’’.

21 (f) MEDICAL SAVINGS ACCOUNTS MAY BE OFFERED

22 UNDER CAFETERIA PLANS.—Subsection (f) of section

23 125 of such Code is amended by striking ‘‘106(b),’’.

24 (g) INDIVIDUALS RECEIVING IMMEDIATE FEDERAL

25 ANNUITIES ELIGIBLE FOR MEDICAL SAVINGS AC-
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1 COUNTS.—Paragraph (1) of section 220(c) of such Code

2 (defining eligible individual), as amended by subsections

3 (a) and (b), is further amended by adding at the end the

4 following new subparagraph:

5 ‘‘(C) SPECIAL RULES FOR INDIVIDUALS

6 RECEIVING IMMEDIATE FEDERAL ANNU7 ITIES.—

8 ‘‘(i) IN GENERAL.—Subparagraph

9 (A)(iii) and subsection (b)(4) shall not

10 apply for any month to an individual—

11 ‘‘(I) who, as of the first day of

12 such month, is enrolled in a high de13 ductible health plan under chapter 89

14 of title 5, United States Code, and

15 ‘‘(II) who is entitled to receive

16 for such month any amount by reason

17 of being an annuitant (as defined in

18 section 8901(3) of such title 5).

19 ‘‘(ii) SPECIAL RULE FOR SPOUSE OF

20 ANNUITANT.—In the case of the spouse of

21 an individual described in clause (i) who is

22 not also described in clause (i), subsection

23 (b)(4) shall not apply to such spouse if

24 such individual and spouse have family
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1 coverage under the same plan described in

2 clause (i)(I).’’.

3 (h) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to taxable years ending after the

5 date of the enactment of this Act.

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