II 

Calendar No. 417 

109TH CONGRESS 

2D SESSION S. 1955 

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

the Public Health Service Act to expand health care access and reduce 

costs through the creation of small business health plans and through 

modernization of the health insurance marketplace. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 2, 2005 

Mr. ENZI (for himself, Mr. NELSON of Nebraska, Mr. BURNS, Mr. BURR, Mr. 

ROBERTS, Mr. CRAIG, Mr. ALLARD, and Mr. CORNYN) introduced the following bill; which was read twice and referred to the Committee on 

Health, Education, Labor, and Pensions 

APRIL 27, 2006 

Reported by Mr. ENZI, with an amendment 

[Strike out all after the enacting clause and insert the part printed in italic] 

A BILL 

To amend title I of the Employee Retirement Security Act 

of 1974 and the Public Health Service Act to expand 

health care access and reduce costs through the creation 

of small business health plans and through modernization 

of the health insurance marketplace. 

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


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1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

3 ‘‘Health Insurance Marketplace Modernization and Af4 fordability Act of 2005’’. 

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

6 as follows: 

Sec. 1. Short title and table of contents. 

TITLE I—SMALL BUSINESS HEALTH PLANS 

Sec. 101. Rules governing small business health plans. 

Sec. 102. Cooperation between Federal and State authorities. 

Sec. 103. Effective date and transitional and other rules. 

TITLE II—NEAR-TERM MARKET RELIEF 

Sec. 201. Near-term market relief. 

TITLE III—HARMONIZATION OF HEALTH INSURANCE LAWS 

Sec. 301. Health Insurance Regulatory Harmonization. 

7 TITLE I—SMALL BUSINESS 

8 HEALTH PLANS 

9 SEC. 101. RULES GOVERNING SMALL BUSINESS HEALTH 

10 PLANS. 

11 (a) IN GENERAL.—Subtitle B of title I of the Em12 ployee Retirement Income Security Act of 1974 is amend13 ed by adding after part 7 the following new part: 

14 ‘‘PART 8—RULES GOVERNING SMALL BUSINESS 

15 HEALTH PLANS 

16 ‘‘SEC. 801. SMALL BUSINESS HEALTH PLANS. 

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

18 term ‘small business health plan’ means a fully insured 


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1 group health plan whose sponsor is (or is deemed under 

2 this part to be) described in subsection (b). 

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

4 plan is described in this subsection if such sponsor— 

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

6 with a constitution and bylaws specifically stating its 

7 purpose and providing for periodic meetings on at 

8 least an annual basis, as a bona fide trade associa9 tion, a bona fide industry association (including a 

10 rural electric cooperative association or a rural tele11 phone cooperative association), a bona fide profes12 sional association, or a bona fide chamber of com13 merce (or similar bona fide business association, in14 cluding a corporation or similar organization that 

15 operates on a cooperative basis (within the meaning 

16 of section 1381 of the Internal Revenue Code of 

17 1986)), for substantial purposes other than that of 

18 obtaining or providing medical care; 

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

20 receives the active support of its members and re21 quires for membership payment on a periodic basis 

22 of dues or payments necessary to maintain eligibility 

23 for membership in the sponsor; and 

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

25 or payments, or coverage under the plan on the 


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1 basis of health status-related factors with respect to 

2 the employees of its members (or affiliated mem3 bers), or the dependents of such employees, and does 

4 not condition such dues or payments on the basis of 

5 group health plan participation. 

6 Any sponsor consisting of an association of entities which 

7 meet the requirements of paragraphs (1), (2), and (3) 

8 shall be deemed to be a sponsor described in this sub9 section. 

10 ‘‘SEC. 802. CERTIFICATION OF SMALL BUSINESS HEALTH 

11 PLANS. 

12 ‘‘(a) IN GENERAL.—Not later than 6 months after 

13 the date of enactment of this part, the applicable authority 

14 shall prescribe by interim final rule a procedure under 

15 which the applicable authority shall certify small business 

16 health plans which apply for certification as meeting the 

17 requirements of this part. 

18 ‘‘(b) REQUIREMENTS APPLICABLE TO CERTIFIED

19 PLANS.—a small business health plan with respect to 

20 which certification under this part is in effect shall meet 

21 the applicable requirements of this part, effective on the 

22 date of certification (or, if later, on the date on which the 

23 plan is to commence operations). 

24 ‘‘(c) REQUIREMENTS FOR CONTINUED CERTIFI25 CATION.—The applicable authority may provide by regulaVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6401 E:\BILLS\S1955.RS S1955

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1 tion for continued certification of small business health 

2 plans under this part. Such regulation shall provide for 

3 the revocation of a certification if the applicable authority 

4 finds that the small employer health plan involved is fail5 ing to comply with the requirements of this part. 

6 ‘‘(d) CLASS CERTIFICATION FOR FULLY INSURED

7 PLANS.—The applicable authority shall establish a class 

8 certification procedure for small business health plans 

9 under which all benefits consist of health insurance cov10 erage. Under such procedure, the applicable authority 

11 shall provide for the granting of certification under this 

12 part to the plans in each class of such small business 

13 health plans upon appropriate filing under such procedure 

14 in connection with plans in such class and payment of the 

15 prescribed fee under section 806(a). 

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

17 BOARDS OF TRUSTEES. 

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

19 are met with respect to a small business health plan if 

20 the sponsor has met (or is deemed under this part to have 

21 met) the requirements of section 801(b) for a continuous 

22 period of not less than 3 years ending with the date of 

23 the application for certification under this part. 


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

2 this subsection are met with respect to a small business 

3 health plan if the following requirements are met: 

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

5 pursuant to a plan document, by a board of trustees 

6 which pursuant to a trust agreement has complete 

7 fiscal control over the plan and which is responsible 

8 for all operations of the plan. 

9 ‘‘(2) RULES OF OPERATION AND FINANCIAL

10 CONTROLS.—The board of trustees has in effect 

11 rules of operation and financial controls, based on a 

12 3-year plan of operation, adequate to carry out the 

13 terms of the plan and to meet all requirements of 

14 this title applicable to the plan. 

15 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

16 PARTICIPATING EMPLOYERS AND TO CONTRAC17 TORS.— 

18 ‘‘(A) BOARD MEMBERSHIP.— 

19 ‘‘(i) IN GENERAL.—Except as pro20 vided in clauses (ii) and (iii), the members 

21 of the board of trustees are individuals se22 lected from individuals who are the owners, 

23 officers, directors, or employees of the par24 ticipating employers or who are partners in 


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1 the participating employers and actively 

2 participate in the business. 

3 ‘‘(ii) LIMITATION.— 

4 ‘‘(I) GENERAL RULE.—Except as 

5 provided in subclauses (II) and (III), 

6 no such member is an owner, officer, 

7 director, or employee of, or partner in, 

8 a contract administrator or other 

9 service provider to the plan. 

10 ‘‘(II) LIMITED EXCEPTION FOR

11 PROVIDERS OF SERVICES SOLELY ON

12 BEHALF OF THE SPONSOR.—Officers 

13 or employees of a sponsor which is a 

14 service provider (other than a contract 

15 administrator) to the plan may be 

16 members of the board if they con17 stitute not more than 25 percent of 

18 the membership of the board and they 

19 do not provide services to the plan 

20 other than on behalf of the sponsor. 

21 ‘‘(III) TREATMENT OF PRO22 VIDERS OF MEDICAL CARE.—In the 

23 case of a sponsor which is an associa24 tion whose membership consists pri25 marily of providers of medical care, 


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1 subclause (I) shall not apply in the 

2 case of any service provider described 

3 in subclause (I) who is a provider of 

4 medical care under the plan. 

5 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

6 Clause (i) shall not apply to a small busi7 ness health plan which is in existence on 

8 the date of the enactment of the Health 

9 Insurance Marketplace Modernization and 

10 Affordability Act of 2005. 

11 ‘‘(B) SOLE AUTHORITY.—The board has 

12 sole authority under the plan to approve appli13 cations for participation in the plan and to con14 tract with insurers and service providers. 

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

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

17 maintained by a franchiser for a franchise network con18 sisting of its franchisees— 

19 ‘‘(1) the requirements of subsection (a) and sec20 tion 801(a) shall be deemed met if such require21 ments would otherwise be met if the franchiser were 

22 deemed to be the sponsor referred to in section 

23 801(b), such network were deemed to be an associa24 tion described in section 801(b), and each franchisee 


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

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

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

4 be deemed met. 

5 The Secretary may by regulation define for purposes of 

6 this subsection the terms ‘franchiser’, ‘franchise network’, 

7 and ‘franchisee’. 

8 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE9 MENTS. 

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

11 requirements of this subsection are met with respect to 

12 a small business health plan if, under the terms of the 

13 plan— 

14 ‘‘(1) each participating employer must be— 

15 ‘‘(A) a member of the sponsor; 

16 ‘‘(B) the sponsor; or 

17 ‘‘(C) an affiliated member of the sponsor 

18 with respect to which the requirements of sub19 section (b) are met, except that, in the case of 

20 a sponsor which is a professional association or 

21 other individual-based association, if at least 

22 one of the officers, directors, or employees of an 

23 employer, or at least one of the individuals who 

24 are partners in an employer and who actively 

25 participates in the business, is a member or 


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1 such an affiliated member of the sponsor, par2 ticipating employers may also include such em3 ployer; and 

4 ‘‘(2) all individuals commencing coverage under 

5 the plan after certification under this part must 

6 be— 

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

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

9 employees of, or partners in, participating em10 ployers; or 

11 ‘‘(B) the beneficiaries of individuals de12 scribed in subparagraph (A). 

13 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM14 PLOYEES.—In the case of a small business health plan in 

15 existence on the date of the enactment of the Health In16 surance Marketplace Modernization and Affordability Act 

17 of 2005, an affiliated member of the sponsor of the plan 

18 may be offered coverage under the plan as a participating 

19 employer only if— 

20 ‘‘(1) the affiliated member was an affiliated 

21 member on the date of certification under this part; 

22 or 

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

24 date of the offering of such coverage, the affiliated 

25 member has not maintained or contributed to a 


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1 group health plan with respect to any of its employ2 ees who would otherwise be eligible to participate in 

3 such small business health plan. 

4 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re5 quirements of this subsection are met with respect to a 

6 small business health plan if, under the terms of the plan, 

7 no participating employer may provide health insurance 

8 coverage in the individual market for any employee not 

9 covered under the plan which is similar to the coverage 

10 contemporaneously provided to employees of the employer 

11 under the plan, if such exclusion of the employee from cov12 erage under the plan is based on a health status-related 

13 factor with respect to the employee and such employee 

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

15 for coverage under the plan. 

16 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

17 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI18 PATE.—The requirements of this subsection are met with 

19 respect to a small business health plan if— 

20 ‘‘(1) under the terms of the plan, all employers 

21 meeting the preceding requirements of this section 

22 are eligible to qualify as participating employers for 

23 all geographically available coverage options, unless, 

24 in the case of any such employer, participation or 

25 contribution requirements of the type referred to in 


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1 section 2711 of the Public Health Service Act are 

2 not met; 

3 ‘‘(2) upon request, any employer eligible to par4 ticipate is furnished information regarding all cov5 erage options available under the plan; and 

6 ‘‘(3) the applicable requirements of sections 

7 701, 702, and 703 are met with respect to the plan. 

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

9 DOCUMENTS, CONTRIBUTION RATES, AND 

10 BENEFIT OPTIONS. 

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

12 are met with respect to a small business health plan if 

13 the following requirements are met: 

14 ‘‘(1) CONTENTS OF GOVERNING INSTRU15 MENTS.— 

16 ‘‘(A) IN GENERAL.—The instruments gov17 erning the plan include a written instrument, 

18 meeting the requirements of an instrument re19 quired under section 402(a)(1), which— 

20 ‘‘(i) provides that the board of direc21 tors serves as the named fiduciary required 

22 for plans under section 402(a)(1) and 

23 serves in the capacity of a plan adminis24 trator (referred to in section 3(16)(A)); 

25 and 


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1 ‘‘(ii) provides that the sponsor of the 

2 plan is to serve as plan sponsor (referred 

3 to in section 3(16)(B)). 

4 ‘‘(B) DESCRIPTION OF MATERIAL PROVI5 SIONS.—The terms of the health insurance cov6 erage (including the terms of any individual 

7 certificates that may be offered to individuals in 

8 connection with such coverage) describe the ma9 terial benefit and rating, and other provisions 

10 set forth in this section and such material pro11 visions are included in the summary plan de12 scription. 

13 ‘‘(2) CONTRIBUTION RATES MUST BE NON14 DISCRIMINATORY.— 

15 ‘‘(A) IN GENERAL.—The contribution rates 

16 for any participating small employer shall not 

17 vary on the basis of any health status-related 

18 factor in relation to employees of such employer 

19 or their beneficiaries and shall not vary on the 

20 basis of the type of business or industry in 

21 which such employer is engaged. 

22 ‘‘(B) EFFECT OF TITLE.—Nothing in this 

23 title or any other provision of law shall be con24 strued to preclude a health insurance issuer of25 fering health insurance coverage in connection 


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1 with a small business health plan, and at the 

2 request of such small business health plan, 

3 from— 

4 ‘‘(i) setting contribution rates for the 

5 small business health plan based on the 

6 claims experience of the plan so long as 

7 any variation in such rates complies with 

8 the requirements of clause (ii); or 

9 ‘‘(ii) varying contribution rates for 

10 participating employers in a small business 

11 health plan in a State to the extent that 

12 such rates could vary using the same 

13 methodology employed in such State for 

14 regulating premium rates, subject to the 

15 terms of part I of subtitle A of title XXIX 

16 of the Public Health Service Act (relating 

17 to rating requirements), as added by title 

18 II of the Health Insurance Marketplace 

19 Modernization and Affordability Act of 

20 2005. 

21 ‘‘(3) REGULATORY REQUIREMENTS.—Such 

22 other requirements as the applicable authority deter23 mines are necessary to carry out the purposes of this 

24 part, which shall be prescribed by the applicable au25 thority by regulation. 


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1 ‘‘(b) ABILITY OF SMALL BUSINESS HEALTH PLANS

2 TO DESIGN BENEFIT OPTIONS.—Nothing in this part or 

3 any provision of State law (as defined in section 

4 514(c)(1)) shall be construed to preclude a small business 

5 health plan or a health insurance issuer offering health 

6 insurance coverage in connection with a small business 

7 health plan, from exercising its sole discretion in selecting 

8 the specific benefits and services consisting of medical care 

9 to be included as benefits under such plan or coverage, 

10 except that such benefits and services must meet the terms 

11 and specifications of part II of subtitle A of title XXIX 

12 of the Public Health Service Act (relating to lower cost 

13 plans), as added by title II of the Health Insurance Mar14 ketplace Modernization and Affordability Act of 2005, 

15 provided that, upon issuance by the Secretary of Health 

16 and Human Services of the List of Required Benefits as 

17 provided for in section 2922(a) of the Public Health Serv18 ice Act, the required scope and application for each benefit 

19 or service listed in the List of Required Benefits shall be— 

20 ‘‘(1) if the domicile State mandates such ben21 efit or service, the scope and application required by 

22 the domicile State; or 

23 ‘‘(2) if the domicile State does not mandate 

24 such benefit or service, the scope and application re25 quired by the non-domicile State that does require 


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1 such benefit or service in which the greatest number 

2 of the small business health plan’s participating em3 ployers are located. 

4 ‘‘(c) STATE LICENSURE AND INFORMATIONAL FIL5 ING.— 

6 ‘‘(1) DOMICILE STATE.—Coverage shall be 

7 issued to a small business health plan in the State 

8 in which the sponsor’s principal place of business is 

9 located. 

10 ‘‘(2) NON-DOMICILE STATES.—With respect to 

11 a State (other than the domicile State) in which par12 ticipating employers of a small business health plan 

13 are located, an insurer issuing coverage to such 

14 small business health plan shall not be required to 

15 obtain full licensure in such State, except that the 

16 insurer shall provide each State insurance commis17 sioner (or applicable State authority) with an infor18 mational filing describing policies sold and other rel19 evant information as may be requested by the appli20 cable State authority. 

21 ‘‘SEC. 806. REQUIREMENTS FOR APPLICATION AND RE22 LATED REQUIREMENTS. 

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

24 pursuant to section 802(a), a small business health plan 

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


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1 an application for certification under this part a filing fee 

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

3 case of the Secretary, to the extent provided in appropria4 tion Acts, for the sole purpose of administering the certifi5 cation procedures applicable with respect to small business 

6 health plans. 

7 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA8 TION FOR CERTIFICATION.—An application for certifi9 cation under this part meets the requirements of this sec10 tion only if it includes, in a manner and form which shall 

11 be prescribed by the applicable authority by regulation, at 

12 least the following information: 

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

14 and addresses of— 

15 ‘‘(A) the sponsor; and 

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

17 of the plan. 

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

19 BUSINESS.—The States in which participants and 

20 beneficiaries under the plan are to be located and 

21 the number of them expected to be located in each 

22 such State. 

23 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro24 vided by the board of trustees that the bonding re25 quirements of section 412 will be met as of the date 


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1 of the application or (if later) commencement of op2 erations. 

3 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu4 ments governing the plan (including any bylaws and 

5 trust agreements), the summary plan description, 

6 and other material describing the benefits that will 

7 be provided to participants and beneficiaries under 

8 the plan. 

9 ‘‘(5) AGREEMENTS WITH SERVICE PRO10 VIDERS.—A copy of any agreements between the 

11 plan, health insurance issuer, and contract adminis12 trators and other service providers. 

13 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

14 STATES.—A certification granted under this part to a 

15 small business health plan shall not be effective unless 

16 written notice of such certification is filed with the appli17 cable State authority of each State in which at least 25 

18 percent of the participants and beneficiaries under the 

19 plan are located. For purposes of this subsection, an indi20 vidual shall be considered to be located in the State in 

21 which a known address of such individual is located or 

22 in which such individual is employed. 

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

24 of any small business health plan certified under this part, 

25 descriptions of material changes in any information which 


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1 was required to be submitted with the application for the 

2 certification under this part shall be filed in such form 

3 and manner as shall be prescribed by the applicable au4 thority by regulation. The applicable authority may re5 quire by regulation prior notice of material changes with 

6 respect to specified matters which might serve as the basis 

7 for suspension or revocation of the certification. 

8 ‘‘SEC. 807. NOTICE REQUIREMENTS FOR VOLUNTARY TER9 MINATION. 

10 ‘‘A small business health plan which is or has been 

11 certified under this part may terminate (upon or at any 

12 time after cessation of accruals in benefit liabilities) only 

13 if the board of trustees, not less than 60 days before the 

14 proposed termination date— 

15 ‘‘(1) provides to the participants and bene16 ficiaries a written notice of intent to terminate stat17 ing that such termination is intended and the pro18 posed termination date; 

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

20 of the plan in connection with such termination in 

21 a manner which will result in timely payment of all 

22 benefits for which the plan is obligated; and 

23 ‘‘(3) submits such plan in writing to the appli24 cable authority. 


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1 Actions required under this section shall be taken in such 

2 form and manner as may be prescribed by the applicable 

3 authority by regulation. 

4 ‘‘SEC. 808. DEFINITIONS AND RULES OF CONSTRUCTION. 

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

6 ‘‘(1) AFFILIATED MEMBER.—The term ‘affili7 ated member’ means, in connection with a sponsor— 

8 ‘‘(A) a person who is otherwise eligible to 

9 be a member of the sponsor but who elects an 

10 affiliated status with the sponsor, 

11 ‘‘(B) in the case of a sponsor with mem12 bers which consist of associations, a person who 

13 is a member of any such association and elects 

14 an affiliated status with the sponsor, or 

15 ‘‘(C) in the case of a small business health 

16 plan in existence on the date of the enactment 

17 of the Health Insurance Marketplace Mod18 ernization and Affordability Act of 2005, a per19 son eligible to be a member of the sponsor or 

20 one of its member associations. 

21 ‘‘(2) APPLICABLE AUTHORITY.—The term ‘ap22 plicable authority’ means the Secretary, except that, 

23 in connection with any exercise of the Secretary’s 

24 authority with respect to which the Secretary is re25 quired under section 506(d) to consult with a State, 


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1 such term means the Secretary, in consultation with 

2 such State. 

3 ‘‘(3) APPLICABLE STATE AUTHORITY.—The 

4 term ‘applicable State authority’ means, with respect 

5 to a health insurance issuer in a State, the State in6 surance commissioner or official or officials des7 ignated by the State to enforce the requirements of 

8 title XXVII of the Public Health Service Act for the 

9 State involved with respect to such issuer. 

10 ‘‘(4) GROUP HEALTH PLAN.—The term ‘group 

11 health plan’ has the meaning provided in section 

12 733(a)(1) (after applying subsection (b) of this sec13 tion). 

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

15 term ‘health insurance coverage’ has the meaning 

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

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

18 ‘health insurance issuer’ has the meaning provided 

19 in section 733(b)(2). 

20 ‘‘(7) INDIVIDUAL MARKET.— 

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

22 market’ means the market for health insurance 

23 coverage offered to individuals other than in 

24 connection with a group health plan. 


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1 ‘‘(B) TREATMENT OF VERY SMALL

2 GROUPS.— 

3 ‘‘(i) IN GENERAL.—Subject to clause 

4 (ii), such term includes coverage offered in 

5 connection with a group health plan that 

6 has fewer than 2 participants as current 

7 employees or participants described in sec8 tion 732(d)(3) on the first day of the plan 

9 year. 

10 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

11 shall not apply in the case of health insur12 ance coverage offered in a State if such 

13 State regulates the coverage described in 

14 such clause in the same manner and to the 

15 same extent as coverage in the small group 

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

17 the Public Health Service Act) is regulated 

18 by such State. 

19 ‘‘(8) MEDICAL CARE.—The term ‘medical care’ 

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

21 ‘‘(9) PARTICIPATING EMPLOYER.—The term 

22 ‘participating employer’ means, in connection with a 

23 small business health plan, any employer, if any in24 dividual who is an employee of such employer, a 

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1 vidual who is such employer (or any dependent, as 

2 defined under the terms of the plan, of such indi3 vidual) is or was covered under such plan in connec4 tion with the status of such individual as such an 

5 employee, partner, or self-employed individual in re6 lation to the plan. 

7 ‘‘(10) SMALL EMPLOYER.—The term ‘small em8 ployer’ means, in connection with a group health 

9 plan with respect to a plan year, a small employer 

10 as defined in section 2791(e)(4). 

11 ‘‘(b) RULE OF CONSTRUCTION.—For purposes of de12 termining whether a plan, fund, or program is an em13 ployee welfare benefit plan which is a small business 

14 health plan, and for purposes of applying this title in con15 nection with such plan, fund, or program so determined 

16 to be such an employee welfare benefit plan— 

17 ‘‘(1) in the case of a partnership, the term ‘em18 ployer’ (as defined in section 3(5)) includes the part19 nership in relation to the partners, and the term 

20 ‘employee’ (as defined in section 3(6)) includes any 

21 partner in relation to the partnership; and 

22 ‘‘(2) in the case of a self-employed individual, 

23 the term ‘employer’ (as defined in section 3(5)) and 

24 the term ‘employee’ (as defined in section 3(6)) shall 

25 include such individual.’’. 


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1 (b) CONFORMING AMENDMENTS TO PREEMPTION

2 RULES.— 

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

4 1144(b)(6)) is amended by adding at the end the 

5 following new subparagraph: 

6 ‘‘(E) The preceding subparagraphs of this paragraph 

7 do not apply with respect to any State law in the case 

8 of a small business health plan which is certified under 

9 part 8.’’. 

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

11 is amended— 

12 (A) in subsection (b)(4), by striking ‘‘Sub13 section (a)’’ and inserting ‘‘Subsections (a) and 

14 (d)’’; 

15 (B) in subsection (b)(5), by striking ‘‘sub16 section (a)’’ in subparagraph (A) and inserting 

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

18 (a)(2)(B) and (b) of section 805’’, and by strik19 ing ‘‘subsection (a)’’ in subparagraph (B) and 

20 inserting ‘‘subsection (a) of this section or sub21 section (a)(2)(B) or (b) of section 805’’; 

22 (C) by redesignating subsection (d) as sub23 section (e); and 

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

25 following new subsection: 


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

2 provisions of this title shall supersede any and all State 

3 laws insofar as they may now or hereafter preclude a 

4 health insurance issuer from offering health insurance cov5 erage in connection with a small business health plan 

6 which is certified under part 8. 

7 ‘‘(2) In any case in which health insurance coverage 

8 of any policy type is offered under a small business health 

9 plan certified under part 8 to a participating employer op10 erating in such State, the provisions of this title shall su11 persede any and all laws of such State insofar as they may 

12 establish rating and benefit requirements that would oth13 erwise apply to such coverage, provided the requirements 

14 of section 805(a)(2)(B) and (b) (concerning small business 

15 health plan rating and benefits) are met.’’. 

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

17 U.S.C. 1144(b)(6)(A)) is amended— 

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

19 the end; 

20 (B) in clause (ii), by inserting ‘‘and which 

21 does not provide medical care (within the mean22 ing of section 733(a)(2)),’’ after ‘‘arrange23 ment,’’, and by striking ‘‘title.’’ and inserting 

24 ‘‘title, and’’; and 


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

2 clause: 

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

4 of any other employee welfare benefit plan which is 

5 a multiple employer welfare arrangement and which 

6 provides medical care (within the meaning of section 

7 733(a)(2)), any law of any State which regulates in8 surance may apply.’’. 

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

10 by paragraph (2)(C)) is amended by striking ‘‘Noth11 ing’’ and inserting ‘‘(1) Except as provided in para12 graph (2), nothing’’. 

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

14 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

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

16 person serving as the sponsor of a small business health 

17 plan under part 8.’’. 

18 (d) SAVINGS CLAUSE.—Section 731(c) of such Act 

19 is amended by inserting ‘‘or part 8’’ after ‘‘this part’’. 

20 (e) CLERICAL AMENDMENT.—The table of contents 

21 in section 1 of the Employee Retirement Income Security 

22 Act of 1974 is amended by inserting after the item relat23 ing to section 734 the following new items: 

‘‘PART 8—RULES GOVERNING SMALL BUSINESS HEALTH PLANS

‘‘801. Small business health plans. 

‘‘802. Certification of small business health plans. 

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


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‘‘804. Participation and coverage requirements. 

‘‘805. Other requirements relating to plan documents, contribution rates, and 

benefit options. 

‘‘806. Requirements for application and related requirements. 

‘‘807. Notice requirements for voluntary termination. 

‘‘808. Definitions and rules of construction.’’. 

1 SEC. 102. COOPERATION BETWEEN FEDERAL AND STATE 

2 AUTHORITIES. 

3 Section 506 of the Employee Retirement Income Se4 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

5 at the end the following new subsection: 

6 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

7 TO SMALL BUSINESS HEALTH PLANS.— 

8 ‘‘(1) AGREEMENTS WITH STATES.—The Sec9 retary shall consult with the State recognized under 

10 paragraph (2) with respect to a small business 

11 health plan regarding the exercise of— 

12 ‘‘(A) the Secretary’s authority under sec13 tions 502 and 504 to enforce the requirements 

14 for certification under part 8; and 

15 ‘‘(B) the Secretary’s authority to certify 

16 small business health plans under part 8 in ac17 cordance with regulations of the Secretary ap18 plicable to certification under part 8. 

19 ‘‘(2) RECOGNITION OF DOMICILE STATE.—In 

20 carrying out paragraph (1), the Secretary shall en21 sure that only one State will be recognized, with re22 spect to any particular small business health plan, 


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1 as the State with which consultation is required. In 

2 carrying out this paragraph such State shall be the 

3 domicile State, as defined in section 805(c).’’. 

4 SEC. 103. EFFECTIVE DATE AND TRANSITIONAL AND 

5 OTHER RULES. 

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

7 this title shall take effect 1 year after the date of the en8 actment of this Act. The Secretary of Labor shall first 

9 issue all regulations necessary to carry out the amend10 ments made by this title within 1 year after the date of 

11 the enactment of this Act. 

12 (b) TREATMENT OF CERTAIN EXISTING HEALTH

13 BENEFITS PROGRAMS.— 

14 (1) IN GENERAL.—In any case in which, as of 

15 the date of the enactment of this Act, an arrange16 ment is maintained in a State for the purpose of 

17 providing benefits consisting of medical care for the 

18 employees and beneficiaries of its participating em19 ployers, at least 200 participating employers make 

20 contributions to such arrangement, such arrange21 ment has been in existence for at least 10 years, and 

22 such arrangement is licensed under the laws of one 

23 or more States to provide such benefits to its par24 ticipating employers, upon the filing with the appli25 cable authority (as defined in section 808(a)(2) of 


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1 the Employee Retirement Income Security Act of 

2 1974 (as amended by this subtitle)) by the arrange3 ment of an application for certification of the ar4 rangement under part 8 of subtitle B of title I of 

5 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) 

10 and 803(a) of the Employee Retirement Income 

11 Security Act of 1974 shall be deemed met with 

12 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 trustees which— 

16 (i) is elected by the participating em17 ployers, with each employer having one 

18 vote; and 

19 (ii) has complete fiscal control over 

20 the arrangement and which is responsible 

21 for all operations of the arrangement; 

22 (D) the requirements of section 804(a) of 

23 such Act shall be deemed met with respect to 

24 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 or at such 

10 time that the arrangement provides coverage to par11 ticipants and beneficiaries in any State other than 

12 the States in which coverage is provided on such 

13 date of enactment. 

14 (2) DEFINITIONS.—For purposes of this sub15 section, the terms ‘‘group health plan’’, ‘‘medical 

16 care’’, and ‘‘participating employer’’ shall have the 

17 meanings provided in section 808 of the Employee 

18 Retirement Income Security Act of 1974, except 

19 that the reference in paragraph (7) of such section 

20 to an ‘‘small business health plan’’ shall be deemed 

21 a reference to an arrangement referred to in this 

22 subsection. 


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1 TITLE II—NEAR-TERM MARKET 

2 RELIEF 

3 SEC. 201. NEAR-TERM MARKET RELIEF. 

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

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

6 ‘‘TITLE XXIX—HEALTH CARE IN7 SURANCE MARKETPLACE RE8 FORM 

9 ‘‘SEC. 2901. GENERAL INSURANCE DEFINITIONS. 

10 ‘‘In this title, the terms ‘health insurance coverage’, 

11 ‘health insurance issuer’, ‘group health plan’, and ‘indi12 vidual health insurance’ shall have the meanings given 

13 such terms in section 2791. 

14 ‘‘Subtitle A—Near-Term Market 

15 Relief 

16 ‘‘PART I—RATING REQUIREMENTS 

17 ‘‘SEC. 2911. DEFINITIONS. 

18 ‘‘In this part: 

19 ‘‘(1) ADOPTING STATE.—The term ‘adopting 

20 State’ means a State that has enacted either the 

21 NAIC model rules or the National Interim Model 

22 Rating Rules in their entirety and as the exclusive 

23 laws of the State that relate to rating in the small 

24 group insurance market. 


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1 ‘‘(2) COMMISSION.—The term ‘Commission’ 

2 means the Harmonized Standards Commission es3 tablished under section 2921. 

4 ‘‘(3) ELIGIBLE INSURER.—The term ‘eligible 

5 insurer’ means a health insurance issuer that is li6 censed in a nonadopting State and that— 

7 ‘‘(A) notifies the Secretary, not later than 

8 30 days prior to the offering of coverage de9 scribed in this subparagraph, that the issuer in10 tends to offer small group health insurance cov11 erage consistent with the National Interim 

12 Model Rating Rules in a nonadopting State; 

13 ‘‘(B) notifies the insurance department of 

14 a nonadopting State (or other State agency), 

15 not later than 30 days prior to the offering of 

16 coverage described in this subparagraph, that 

17 the issuer intends to offer small group health 

18 insurance coverage in that State consistent with 

19 the National Interim Model Rating Rules, and 

20 provides with such notice a copy of any insur21 ance policy that it intends to offer in the State, 

22 its most recent annual and quarterly financial 

23 reports, and any other information required to 

24 be filed with the insurance department of the 


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1 State (or other State agency) by the Secretary 

2 in regulations; and 

3 ‘‘(C) includes in the terms of the health in4 surance coverage offered in nonadopting States 

5 (including in the terms of any individual certifi6 cates that may be offered to individuals in con7 nection with such group health coverage) and 

8 filed with the State pursuant to subparagraph 

9 (B), a description in the insurer’s contract of 

10 the National Interim Model Rating Rules and 

11 an affirmation that such Rules are included in 

12 the terms of such contract. 

13 ‘‘(4) HEALTH INSURANCE COVERAGE.—The 

14 term ‘health insurance coverage’ means any coverage 

15 issued in small group health insurance market. 

16 ‘‘(5) NAIC MODEL RULES.—The term ‘NAIC 

17 model rules’ means the rating rules provided for in 

18 the 1992 Adopted Small Employer Health Insurance 

19 Availability Model Act of the National Association of 

20 Insurance Commissioners. 

21 ‘‘(6) NATIONAL INTERIM MODEL RATING

22 RULES.—The term ‘National Interim Model Rating 

23 Rules’ means the rules promulgated under section 

24 2912(a). 


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1 ‘‘(7) NONADOPTING STATE.—The term ‘non2 adopting State’ means a State that is not an adopt3 ing State. 

4 ‘‘(8) SMALL GROUP INSURANCE MARKET.—The 

5 term ‘small group insurance market’ shall have the 

6 meaning given the term ‘small group market’ in sec7 tion 2791(e)(5). 

8 ‘‘(9) STATE LAW.—The term ‘State law’ means 

9 all laws, decisions, rules, regulations, or other State 

10 actions (including actions by a State agency) having 

11 the effect of law, of any State. 

12 ‘‘SEC. 2912. RATING RULES. 

13 ‘‘(a) NATIONAL INTERIM MODEL RATING RULES.— 

14 Not later than 6 months after the date of enactment of 

15 this title, the Secretary, in consultation with the National 

16 Association of Insurance Commissioners, shall, through 

17 expedited rulemaking procedures, promulgate National In18 terim Model Rating Rules that shall be applicable to the 

19 small group insurance market in certain States until such 

20 time as the provisions of subtitle B become effective. Such 

21 Model Rules shall apply in States as provided for in this 

22 section beginning with the first plan year after the such 

23 Rules are promulgated. 

24 ‘‘(b) UTILIZATION OF NAIC MODEL RULES.—In 

25 promulgating the National Interim Model Rating Rules 


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1 under subsection (a), the Secretary, except as otherwise 

2 provided in this subtitle, shall utilize the NAIC model 

3 rules regarding premium rating and premium variation. 

4 ‘‘(c) TRANSITION IN CERTAIN STATES.— 

5 ‘‘(1) IN GENERAL.—In promulgating the Na6 tional Interim Model Rating Rules under subsection 

7 (a), the Secretary shall have discretion to modify the 

8 NAIC model rules in accordance with this subsection 

9 to the extent necessary to provide for a graduated 

10 transition, of not to exceed 3 years following the 

11 promulgation of such National Interim Rules, with 

12 respect to the application of such Rules to States. 

13 ‘‘(2) INITIAL PREMIUM VARIATION.— 

14 ‘‘(A) IN GENERAL.—Under the modified 

15 National Interim Model Rating Rules as pro16 vided for in paragraph (1), the premium vari17 ation provision of subparagraph (C) shall be ap18 plicable only with respect to small group poli19 cies issued in States which, on the date of en20 actment of this title, have in place premium rat21 ing band requirements that vary by less than 

22 50 percent from the premium variation stand23 ards contained in subparagraph (C) with re24 spect to the standards provided for under the 

25 NAIC model rules. 


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1 ‘‘(B) OTHER STATES.—Health insurance 

2 coverage offered in a State that, on the date of 

3 enactment of this title, has in place premium 

4 rating band requirements that vary by more 

5 than 50 percent from the premium variation 

6 standards contained in subparagraph (C) shall 

7 be subject to such graduated transition sched8 ules as may be provided by the Secretary pursu9 ant to paragraph (1). 

10 ‘‘(C) AMOUNT OF VARIATION.—The 

11 amount of a premium rating variation from the 

12 base premium rate due to health conditions of 

13 covered individuals under this subparagraph 

14 shall not exceed a factor of— 

15 ‘‘(i) +/- 25 percent upon the issuance 

16 of the policy involved; and 

17 ‘‘(ii) +/- 15 percent upon the renewal 

18 of the policy. 

19 ‘‘(3) OTHER TRANSITIONAL AUTHORITY.—In 

20 developing the National Interim Model Rating Rules, 

21 the Secretary may also provide for the application of 

22 transitional standards in certain States with respect 

23 to the following: 

24 ‘‘(A) Independent rating classes for old 

25 and new business. 


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1 ‘‘(B) Such additional transition standards 

2 as the Secretary may determine necessary for 

3 an effective transition. 

4 ‘‘SEC. 2913. APPLICATION AND PREEMPTION. 

5 ‘‘(a) SUPERCEDING OF STATE LAW.— 

6 ‘‘(1) IN GENERAL.—This part shall supersede 

7 any and all State laws insofar as such State laws 

8 (whether enacted prior to or after the date of enact9 ment of this subtitle) relate to rating in the small 

10 group insurance market as applied to an eligible in11 surer, or small group health insurance coverage 

12 issued by an eligible insurer, in a nonadopting State. 

13 ‘‘(2) NONADOPTING STATES.—This part shall 

14 supersede any and all State laws of a nonadopting 

15 State insofar as such State laws (whether enacted 

16 prior to or after the date of enactment of this sub17 title)— 

18 ‘‘(A) prohibit an eligible insurer from of19 fering coverage consistent with the National In20 terim Model Rating Rules in a nonadopting 

21 State; or 

22 ‘‘(B) discriminate against or among eligi23 ble insurers offering health insurance coverage 

24 consistent with the National Interim Model 

25 Rating Rules in a nonadopting state. 


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1 ‘‘(b) SAVINGS CLAUSE AND CONSTRUCTION.— 

2 ‘‘(1) NONAPPLICATION TO ADOPTING STATES.— 

3 Subsection (a) shall not apply with respect to adopt4 ing states. 

5 ‘‘(2) NONAPPLICATION TO CERTAIN INSUR6 ERS.—Subsection (a) shall not apply with respect to 

7 insurers that do not qualify as eligible insurers that 

8 offer small group health insurance coverage in a 

9 nonadopting State. 

10 ‘‘(3) NONAPPLICATION WHERE OBTAINING RE11 LIEF UNDER STATE LAW.—Subsection (a)(1) shall 

12 not apply to any State law in a nonadopting State 

13 to the extent necessary to permit individuals or the 

14 insurance department of the State (or other State 

15 agency) to obtain relief under State law to require 

16 an eligible insurer to comply with the terms of the 

17 small group health insurance coverage issued in the 

18 nonadopting State. In no case shall this paragraph, 

19 or any other provision of this title, be construed to 

20 create a cause of action on behalf of an individual 

21 or any other person under State law in connection 

22 with a group health plan that is subject to the Em23 ployee Retirement Income Security Act of 1974 or 

24 health insurance coverage issued in connection with 

25 such a plan. 


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1 ‘‘(4) NONAPPLICATION TO ENFORCE REQUIRE2 MENTS RELATING TO THE NATIONAL RULE.—Sub3 section (a)(1) shall not apply to any State law in a 

4 nonadopting State to the extent necessary to provide 

5 the insurance department of the State (or other 

6 State agency) with the authority to enforce State 

7 law requirements relating to the National Interim 

8 Model Rating Rules that are not set forth in the 

9 terms of the small group health insurance coverage 

10 issued in a nonadopting State, in a manner that is 

11 consistent with the National Interim Model Rating 

12 Rules and that imposes no greater duties or obliga13 tions on health insurance issuers than the National 

14 Interim Model Rating Rules. 

15 ‘‘(5) NONAPPLICATION TO SUBSECTION (A)(2).— 

16 Paragraphs (3) and (4) shall not apply with respect 

17 to subsection (a)(2). 

18 ‘‘(6) NO AFFECT ON PREEMPTION.—In no case 

19 shall this subsection be construed to affect the scope 

20 of the preemption provided for under the Employee 

21 Retirement Income Security Act of 1974. 

22 ‘‘(c) EFFECTIVE DATE.—This section shall apply be23 ginning in the first plan year following the issuance of the 

24 final rules by the Secretary under the National Interim 

25 Model Rating Rules. 


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1 ‘‘SEC. 2914. CIVIL ACTIONS AND JURISDICTION. 

2 ‘‘(a) IN GENERAL.—The district courts of the United 

3 States shall have exclusive jurisdiction over civil actions 

4 involving the interpretation of this part. 

5 ‘‘(b) ACTIONS.—A health insurance issuer may bring 

6 an action in the district courts of the United States for 

7 injunctive or other equitable relief against a nonadopting 

8 State in connection with the application of a state law that 

9 violates this part. 

10 ‘‘(c) VIOLATIONS OF SECTION 2913.—In the case of 

11 a nonadopting State that is in violation of section 

12 2913(a)(2), a health insurance issuer may bring an action 

13 in the district courts of the United States for damages 

14 against the nonadopting State and, if the health insurance 

15 issuer prevails in such action, the district court shall 

16 award the health insurance issuer its reasonable attorneys 

17 fees and costs. 

18 ‘‘SEC. 2915. SUNSET. 

19 ‘‘The National Interim Model Rating Rules shall re20 main in effect in a non-adopting State until such time as 

21 the harmonized national rating rules are promulgated and 

22 effective pursuant to part II. Upon such effective date, 

23 such harmonized rules shall supersede the National Rules. 

24 ‘‘PART II—LOWER COST PLANS 

25 ‘‘SEC. 2921. DEFINITIONS. 

26 ‘‘In this part: 


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1 ‘‘(1) ADOPTING STATE.—The term ‘adopting 

2 State’ means a State that has enacted the State 

3 Benefit Compendium in its entirety and as the ex4 clusive laws of the State that relate to benefit, serv5 ice, and provider mandates in the group and indi6 vidual insurance markets. 

7 ‘‘(2) ELIGIBLE INSURER.—The term ‘eligible 

8 insurer’ means a health insurance issuer that is li9 censed in a nonadopting State and that— 

10 ‘‘(A) notifies the Secretary, not later than 

11 30 days prior to the offering of coverage de12 scribed in this subparagraph, that the issuer in13 tends to offer group health insurance coverage 

14 consistent with the State Benefit Compendium 

15 in a nonadopting State; 

16 ‘‘(B) notifies the insurance department of 

17 a nonadopting State (or other State agency), 

18 not later than 30 days prior to the offering of 

19 coverage described in this subparagraph, that 

20 the issuer intends to offer group health insur21 ance coverage in that State consistent with the 

22 State Benefit Compendium, and provides with 

23 such notice a copy of any insurance policy that 

24 it intends to offer in the State, its most recent 

25 annual and quarterly financial reports, and any 


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1 other information required to be filed with the 

2 insurance department of the State (or other 

3 State agency) by the Secretary in regulations; 

4 and 

5 ‘‘(C) includes in the terms of the health in6 surance coverage offered in nonadopting States 

7 (including in the terms of any individual certifi8 cates that may be offered to individuals in con9 nection with such group health coverage) and 

10 filed with the State pursuant to subparagraph 

11 (B), a description in the insurer’s contract of 

12 the State Benefit Compendium and that adher13 ence to the Compendium is included as a term 

14 of such contract. 

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

16 term ‘health insurance coverage’ means any coverage 

17 issued in the group or individual health insurance 

18 markets. 

19 ‘‘(4) NONADOPTING STATE.—The term ‘non20 adopting State’ means a State that is not an adopt21 ing State. 

22 ‘‘(5) STATE BENEFIT COMPENDIUM.—The term 

23 ‘State Benefit Compendium’ means the Compendium 

24 issued under section 2922. 


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1 ‘‘(6) STATE LAW.—The term ‘State law’ means 

2 all laws, decisions, rules, regulations, or other State 

3 actions (including actions by a State agency) having 

4 the effect of law, of any State. 

5 ‘‘SEC. 2922. OFFERING LOWER COST PLANS. 

6 ‘‘(a) LIST OF REQUIRED BENEFITS.—Not later than 

7 3 months after the date of enactment of this title, the Sec8 retary shall issue by interim final rule a list (to be known 

9 as the ‘List of Required Benefits’) of the benefit, service, 

10 and provider mandates that are required to be provided 

11 by health insurance issuers in at least 45 States as a re12 sult of the application of State benefit, service, and pro13 vider mandate laws. 

14 ‘‘(b) STATE BENEFIT COMPENDIUM.— 

15 ‘‘(1) VARIANCE.—Not later than 12 months 

16 after the date of enactment of this title, the Sec17 retary shall issue by interim final rule a compen18 dium (to be known as the ‘State Benefit Compen19 dium’) of harmonized descriptions of the benefit, 

20 service, and provider mandates identified under sub21 section (a). In developing the Compendium, with re22 spect to differences in State mandate laws identified 

23 under subsection (a) relating to similar benefits, 

24 services, or providers, the Secretary shall review and 

25 define the scope and application of such State laws 


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1 so that a common approach shall be applicable 

2 under such Compendium in a uniform manner. In 

3 making such determination, the Secretary shall 

4 adopt an approach reflective of the approach used by 

5 a plurality of the States requiring such benefit, serv6 ice, or provider mandate. 

7 ‘‘(2) EFFECT.—The State Benefit Compendium 

8 shall provide that any State benefit, service, and 

9 provider mandate law (enacted prior to or after the 

10 date of enactment of this title) other than those de11 scribed in the Compendium shall not be binding on 

12 health insurance issuers in an adopting State. 

13 ‘‘(3) IMPLEMENTATION.—The effective date of 

14 the State Benefit Compendium shall be the later 

15 of— 

16 ‘‘(A) the date that is 12 months from the 

17 date of enactment of this title; or 

18 ‘‘(B) such subsequent date on which the 

19 interim final rule for the State Benefit Compen20 dium shall be issued. 

21 ‘‘(c) NON-ASSOCIATION COVERAGE.—With respect to 

22 health insurers selling insurance to small employers (as 

23 defined in section 808(a)(10) of the Employee Retirement 

24 Income Security Act of 1974), in the event the Secretary 

25 fails to issue the State Benefit Compendium within 12 


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1 months of the date of enactment of this title, the required 

2 scope and application for each benefit or service listed in 

3 the List of Required Benefits shall, other than with re4 spect to insurance issued to a Small Business Health 

5 Plan, be— 

6 ‘‘(1) if the State in which the insurer issues a 

7 policy mandates such benefit or service, the scope 

8 and application required by such State; or 

9 ‘‘(2) if the State in which the insurer issues a 

10 policy does not mandate such benefit or service, the 

11 scope and application required by such other State 

12 that does require such benefit or service in which the 

13 greatest number of the insurer’s small employer pol14 icyholders are located. 

15 ‘‘(d) UPDATING OF STATE BENEFIT COMPEN16 DIUM.—Not later than 2 years after the date on which 

17 the Compendium is issued under subsection (b)(1), and 

18 every 2 years thereafter, the Secretary, applying the same 

19 methodology provided for in subsections (a) and (b)(1), 

20 in consultation with the National Association of Insurance 

21 Commissioners, shall update the Compendium. The Sec22 retary shall issue the updated Compendium by regulation, 

23 and such updated Compendium shall be effective upon the 

24 first plan year following the issuance of such regulation. 


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1 ‘‘SEC. 2923. APPLICATION AND PREEMPTION. 

2 ‘‘(a) SUPERCEDING OF STATE LAW.— 

3 ‘‘(1) IN GENERAL.—This part shall supersede 

4 any and all State laws (whether enacted prior to or 

5 after the date of enactment of this title) insofar as 

6 such laws relate to benefit, service, or provider man7 dates in the health insurance market as applied to 

8 an eligible insurer, or health insurance coverage 

9 issued by an eligible insurer, in a nonadopting State. 

10 ‘‘(2) NONADOPTING STATES.—This part shall 

11 supersede any and all State laws of a nonadopting 

12 State (whether enacted prior to or after the date of 

13 enactment of this title) insofar as such laws— 

14 ‘‘(A) prohibit an eligible insurer from of15 fering coverage consistent with the State Ben16 efit Compendium, as provided for in section 

17 2922(a), in a nonadopting State; or 

18 ‘‘(B) discriminate against or among eligi19 ble insurers offering or seeking to offer health 

20 insurance coverage consistent with the State 

21 Benefit Compendium in a nonadopting State. 

22 ‘‘(b) SAVINGS CLAUSE AND CONSTRUCTION.— 

23 ‘‘(1) NONAPPLICATION TO ADOPTING STATES.— 

24 Subsection (a) shall not apply with respect to adopt25 ing States. 


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1 ‘‘(2) NONAPPLICATION TO CERTAIN INSUR2 ERS.—Subsection (a) shall not apply with respect to 

3 insurers that do not qualify as eligible insurers who 

4 offer health insurance coverage in a nonadopting 

5 State. 

6 ‘‘(3) NONAPPLICATION WHERE OBTAINING RE7 LIEF UNDER STATE LAW.—Subsection (a)(1) shall 

8 not apply to any State law of a nonadopting State 

9 to the extent necessary to permit individuals or the 

10 insurance department of the State (or other State 

11 agency) to obtain relief under State law to require 

12 an eligible insurer to comply with the terms of the 

13 group health insurance coverage issued in a non14 adopting State. In no case shall this paragraph, or 

15 any other provision of this title, be construed to cre16 ate a cause of action on behalf of an individual or 

17 any other person under State law in connection with 

18 a group health plan that is subject to the Employee 

19 Retirement Income Security Act of 1974 or health 

20 insurance coverage issued in connection with such 

21 plan. 

22 ‘‘(4) NONAPPLICATION TO ENFORCE REQUIRE23 MENTS RELATING TO THE COMPENDIUM.—Sub24 section (a)(1) shall not apply to any State law in a 

25 nonadopting State to the extent necessary to provide 


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1 the insurance department of the State (or other 

2 state agency) authority to enforce State law require3 ments relating to the State Benefit Compendium 

4 that are not set forth in the terms of the group 

5 health insurance coverage issued in a nonadopting 

6 State, in a manner that is consistent with the State 

7 Benefit Compendium and imposes no greater duties 

8 or obligations on health insurance issuers than the 

9 State Benefit Compendium. 

10 ‘‘(5) NONAPPLICATION TO SUBSECTION (A)(2).— 

11 Paragraphs (3) and (4) shall not apply with respect 

12 to subsection (a)(2). 

13 ‘‘(6) NO AFFECT ON PREEMPTION.—In no case 

14 shall this subsection be construed to affect the scope 

15 of the preemption provided for under the Employee 

16 Retirement Income Security Act of 1974. 

17 ‘‘(c) EFFECTIVE DATE.—This section shall apply 

18 upon the first plan year following final issuance by the 

19 Secretary of the State Benefit Compendium. 

20 ‘‘SEC. 2924. CIVIL ACTIONS AND JURISDICTION. 

21 ‘‘(a) IN GENERAL.—The district courts of the United 

22 States shall have exclusive jurisdiction over civil actions 

23 involving the interpretation of this part. 

24 ‘‘(b) ACTIONS.—A health insurance issuer may bring 

25 an action in the district courts of the United States for 


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1 injunctive or other equitable relief against a nonadopting 

2 State in connection with the application of a State law 

3 that violates this part. 

4 ‘‘(c) VIOLATIONS OF SECTION 2923.—In the case of 

5 a nonadopting State that is in violation of section 

6 2923(a)(2), a health insurance issuer may bring an action 

7 in the district courts of the United States for damages 

8 against the nonadopting State and, if the health insurance 

9 issuer prevails in such action, the district court shall 

10 award the health insurance issuer its reasonable attorneys 

11 fees and costs.’’. 

12 TITLE III—HARMONIZATION OF 

13 HEALTH INSURANCE LAWS 

14 SEC. 301. HEALTH INSURANCE REGULATORY HARMONI15 ZATION. 

16 Title XXIX of the Public Health Service Act (as 

17 added by section 201) is amended by adding at the end 

18 the following: 

19 ‘‘Subtitle B—Regulatory 

20 Harmonization 

21 ‘‘SEC. 2931. DEFINITIONS. 

22 ‘‘In this subtitle: 

23 ‘‘(1) ACCESS.—The term ‘access’ means any re24 quirements of State law that regulate the following 

25 elements of access: 


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1 ‘‘(A) Renewability of coverage. 

2 ‘‘(B) Guaranteed issuance as provided for 

3 in title XXVII. 

4 ‘‘(C) Guaranteed issue for individuals not 

5 eligible under subparagraph (B). 

6 ‘‘(D) High risk pools. 

7 ‘‘(E) Pre-existing conditions limitations. 

8 ‘‘(2) ADOPTING STATE.—The term ‘adopting 

9 State’ means a State that has enacted the har10 monized standards adopted under this subtitle in 

11 their entirety and as the exclusive laws of the State 

12 that relate to the harmonized standards. 

13 ‘‘(3) ELIGIBLE INSURER.—The term ‘eligible 

14 insurer’ means a health insurance issuer that is li15 censed in a nonadopting State and that— 

16 ‘‘(A) notifies the Secretary, not later than 

17 30 days prior to the offering of coverage de18 scribed in this subparagraph, that the issuer in19 tends to offer health insurance coverage con20 sistent with the harmonized standards in a non21 adopting State; 

22 ‘‘(B) notifies the insurance department of 

23 a nonadopting State (or other State agency), 

24 not later than 30 days prior to the offering of 

25 coverage described in this subparagraph, that 


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1 the issuer intends to offer group health insur2 ance coverage in that State consistent with the 

3 State Benefit Compendium, and provides with 

4 such notice a copy of any insurance policy that 

5 it intends to offer in the State, its most recent 

6 annual and quarterly financial reports, and any 

7 other information required to be filed with the 

8 insurance department of the State (or other 

9 State agency) by the Secretary in regulations; 

10 and 

11 ‘‘(C) includes in the terms of the health in12 surance coverage offered in nonadopting States 

13 (including in the terms of any individual certifi14 cates that may be offered to individuals in con15 nection with such group health coverage) and 

16 filed with the State pursuant to subparagraph 

17 (B), a description of the harmonized standards 

18 published pursuant to section 2932(g)(2) and 

19 an affirmation that such standards are a term 

20 of the contract. 

21 ‘‘(4) HARMONIZED STANDARDS.—The term 

22 ‘harmonized standards’ means the standards adopt23 ed by the Secretary under section 2932(d). 


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

2 term ‘health insurance coverage’ means any coverage 

3 issued in the health insurance market. 

4 ‘‘(6) NONADOPTING STATE.—The term ‘non5 adopting State’ means a State that fails to enact, 

6 within 2 years of the date in which final regulations 

7 are issued by the Secretary adopting the harmonized 

8 standards under this subtitle, the harmonized stand9 ards in their entirety and as the exclusive laws of 

10 the State that relate to the harmonized standards. 

11 ‘‘(7) PATIENT PROTECTIONS.—The term ‘pa12 tient protections’ means any requirement of State 

13 law that regulate the following elements of patient 

14 protections: 

15 ‘‘(A) Internal appeals. 

16 ‘‘(B) External appeals. 

17 ‘‘(C) Direct access to providers. 

18 ‘‘(D) Prompt payment of claims. 

19 ‘‘(E) Utilization review. 

20 ‘‘(F) Marketing standards. 

21 ‘‘(8) PLURALITY REQUIREMENT.—The term 

22 ‘plurality requirement’ means the most common sub23 stantially similar requirements for elements within 

24 each area described in section 2932(b)(1). 


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1 ‘‘(9) RATING.—The term ‘rating’ means, at the 

2 time of issuance or renewal, requirements of State 

3 law the regulate the following elements of rating: 

4 ‘‘(A) Limits on the types of variations in 

5 rates based on health status. 

6 ‘‘(B) Limits on the types of variations in 

7 rates based on age and gender. 

8 ‘‘(C) Limits on the types of variations in 

9 rates based on geography, industry and group 

10 size. 

11 ‘‘(D) Periods of time during which rates 

12 are guaranteed. 

13 ‘‘(E) The review and approval of rates. 

14 ‘‘(F) The establishment of classes or 

15 blocks of business. 

16 ‘‘(G) The use of actuarial justifications for 

17 rate variations. 

18 ‘‘(10) STATE LAW.—The term ‘State law’ 

19 means all laws, decisions, rules, regulations, or other 

20 State actions (including actions by a State agency) 

21 having the effect of law, of any State. 

22 ‘‘(11) SUBSTANTIALLY SIMILAR.—The term 

23 ‘substantially similar’ means a requirement of State 

24 law applicable to an element of an area identified in 

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1 spects. Where the most common State action with 

2 respect to an element is to adopt no requirement for 

3 an element of an area identified in such section 

4 2932, the plurality requirement shall be deemed to 

5 impose no requirements for such element. 

6 ‘‘SEC. 2932. HARMONIZED STANDARDS. 

7 ‘‘(a) COMMISSION.— 

8 ‘‘(1) ESTABLISHMENT.—The Secretary, in con9 sultation with the NAIC, shall establish the Commis10 sion on Health Insurance Standards Harmonization 

11 (referred to in this subtitle as the ‘Commission’) to 

12 develop recommendations that harmonize incon13 sistent State health insurance laws in accordance 

14 with the laws adopted in a plurality of the States. 

15 ‘‘(2) COMPOSITION.—The Commission shall be 

16 composed of the following individuals to be ap17 pointed by the Secretary: 

18 ‘‘(A) Two State insurance commissioners, 

19 of which one shall be a Democrat and one shall 

20 be a Republican, and of which one shall be des21 ignated as the chairperson and one shall be des22 ignated as the vice chairperson. 

23 ‘‘(B) Two representatives of State govern24 ment, one of which shall be a governor of a 

25 State and one of which shall be a State legisVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00054 Fmt 6652 Sfmt 6401 E:\BILLS\S1955.RS S1955

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1 lator, and one of which shall be a Democrat and 

2 one of which shall be a Republican. 

3 ‘‘(C) Two representatives of employers, of 

4 which one shall represent small employers and 

5 one shall represent large employers. 

6 ‘‘(D) Two representatives of health insur7 ers, of which one shall represent insurers that 

8 offer coverage in all markets (including indi9 vidual, small, and large markets), and one shall 

10 represent insurers that offer coverage in the 

11 small market. 

12 ‘‘(E) Two representatives of consumer or13 ganizations. 

14 ‘‘(F) Two representatives of insurance 

15 agents and brokers. 

16 ‘‘(G) Two representatives of healthcare 

17 providers. 

18 ‘‘(H) Two independent representatives of 

19 the American Academy of Actuaries who have 

20 familiarity with the actuarial methods applica21 ble to health insurance. 

22 ‘‘(I) One administrator of a qualified high 

23 risk pool. 

24 ‘‘(3) TERMS.—The members of the Commission 

25 shall serve for the duration of the Commission. The 


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1 Secretary shall fill vacancies in the Commission as 

2 needed and in a manner consistent with the com3 position described in paragraph (2). 

4 ‘‘(b) DEVELOPMENT OF HARMONIZED STAND5 ARDS.— 

6 ‘‘(1) IN GENERAL.—In accordance with the 

7 process described in subsection (c), the Commission 

8 shall identify and recommend nationally harmonized 

9 standards for the small group health insurance mar10 ket, the individual health insurance market, and the 

11 large group health insurance market that relate to 

12 the following areas: 

13 ‘‘(A) Rating. 

14 ‘‘(B) Access to coverage. 

15 ‘‘(C) Patient protections. 

16 ‘‘(2) RECOMMENDATIONS.—The Commission 

17 shall recommend separate harmonized standards 

18 with respect to each of the three insurance markets 

19 described in paragraph (1) and separate standards 

20 for each element of the areas described in subpara21 graph (A) through (C) of such paragraph within 

22 each such market. Notwithstanding the previous sen23 tence, the Commission shall not recommend any har24 monized standards that disrupt, expand, or duplicate 

25 the benefit, service, or provider mandate standards 


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1 provided in the State Benefit Compendium pursuant 

2 to section 2922(a). 

3 ‘‘(c) PROCESS FOR IDENTIFYING HARMONIZED

4 STANDARDS.— 

5 ‘‘(1) IN GENERAL.—The Commission shall de6 velop recommendations to harmonize inconsistent 

7 State insurance laws with the laws adopted in a plu8 rality of the States. In carrying out the previous 

9 sentence, the Commission shall review all State laws 

10 that regulate insurance in each of the insurance 

11 markets and areas described in subsection (b)(1) 

12 and identify the plurality requirement within each 

13 element of such areas. Such plurality requirement 

14 shall be the harmonized standard for such area in 

15 each such market. 

16 ‘‘(2) CONSULTATION.—The Commission shall 

17 consult with the National Association of Insurance 

18 Commissioners in identifying the plurality require19 ments for each element within the area and in rec20 ommending the harmonized standards. 

21 ‘‘(3) REVIEW OF FEDERAL LAWS.—The Com22 mission shall review whether any Federal law im23 poses a requirement relating to the markets and 

24 areas described in subsection (b)(1). In such case, 

25 such Federal requirement shall be deemed the pluVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00057 Fmt 6652 Sfmt 6401 E:\BILLS\S1955.RS S1955

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1 rality requirement and the Commission shall rec2 ommend the Federal requirement as the harmonized 

3 standard for such elements. 

4 ‘‘(d) RECOMMENDATIONS AND ADOPTION BY SEC5 RETARY.— 

6 ‘‘(1) RECOMMENDATIONS.—Not later than 1 

7 year after the date of enactment of this title, the 

8 Commission shall recommend to the Secretary the 

9 adoption of the harmonized standards identified pur10 suant to subsection (c). 

11 ‘‘(2) REGULATIONS.—Not later than 120 days 

12 after receipt of the Commission’s recommendations 

13 under paragraph (1), the Secretary shall issue final 

14 regulations adopting the recommended harmonized 

15 standards. If the Secretary finds the recommended 

16 standards for an element of an area to be arbitrary 

17 and inconsistent with the plurality requirements of 

18 this section, the Secretary may issue a unique har19 monized standard only for such element through the 

20 application of a process similar to the process set 

21 forth in subsection (c) and through the issuance of 

22 proposed and final regulations. 

23 ‘‘(3) EFFECTIVE DATE.—The regulations issued 

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1 tive on the date that is 2 years after the date on 

2 which such regulations were issued. 

3 ‘‘(e) TERMINATION.—The Commission shall termi4 nate and be dissolved after making the recommendations 

5 to the Secretary pursuant to subsection (d)(1). 

6 ‘‘(f) UPDATED HARMONIZED STANDARDS.— 

7 ‘‘(1) IN GENERAL.—Not later than 2 years 

8 after the termination of the Commission under sub9 section (e), and every 2 years thereafter, the Sec10 retary shall update the harmonized standards. Such 

11 updated standards shall be adopted in accordance 

12 with paragraph (2). 

13 ‘‘(2) UPDATING OF STANDARDS.— 

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

15 review all State laws that regulate insurance in 

16 each of the markets and elements of areas set 

17 forth in subsection (b)(1) and identify whether 

18 a plurality of States have adopted substantially 

19 similar requirements that differ from the har20 monized standards adopted by the Secretary 

21 pursuant to subsection (d). In such case, the 

22 Secretary shall consider State laws that have 

23 been enacted with effective dates that are con24 tingent upon adoption as a harmonized stand25 ard by the Secretary. Substantially similar reVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00059 Fmt 6652 Sfmt 6401 E:\BILLS\S1955.RS S1955

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1 quirements for each element within such area 

2 shall be considered to be an updated har3 monized standard for such an area. 

4 ‘‘(B) REPORT.—The Secretary shall re5 quest the National Association of Insurance 

6 Commissioners to issue a report to the Sec7 retary every 2 years to assist the Secretary in 

8 identifying the updated harmonized standards 

9 under this paragraph. Nothing in this subpara10 graph shall be construed to prohibit the Sec11 retary from issuing updated harmonized stand12 ards in the absence of such a report. 

13 ‘‘(C) REGULATIONS.—The Secretary shall 

14 issue regulations adopting updated harmonized 

15 standards under this paragraph within 90 days 

16 of identifying such standards. Such regulations 

17 shall be effective beginning on the date that is 

18 2 years after the date on which such regula19 tions are issued. 

20 ‘‘(g) PUBLICATION.— 

21 ‘‘(1) LISTING.—The Secretary shall maintain 

22 an up to date listing of all harmonized standards 

23 adopted under this section on the Internet website of 

24 the Department of Health and Human Services. 


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1 ‘‘(2) SAMPLE CONTRACT LANGUAGE.—The Sec2 retary shall publish on the Internet website of the 

3 Department of Health and Human Services sample 

4 contract language that incorporates the harmonized 

5 standards adopted under this section, which may be 

6 used by insurers seeking to qualify as an eligible in7 surer. The types of harmonized standards that shall 

8 be included in sample contract language are the 

9 standards that are relevant to the contractual bar10 gain between the insurer and insured. 

11 ‘‘(h) STATE ADOPTION AND ENFORCEMENT.—Not 

12 later than 2 years after the issuance by the Secretary of 

13 final regulations adopting harmonized standards under 

14 this section, the States may adopt such harmonized stand15 ards (and become an adopting State) and, in which case, 

16 shall enforce the harmonized standards pursuant to State 

17 law. 

18 ‘‘SEC. 2933. APPLICATION AND PREEMPTION. 

19 ‘‘(a) SUPERCEDING OF STATE LAW.— 

20 ‘‘(1) IN GENERAL.—The harmonized standards 

21 adopted under this subtitle shall supersede any and 

22 all State laws (whether enacted prior to or after the 

23 date of enactment of this title) insofar as such State 

24 laws relate to the areas of harmonized standards as 

25 applied to an eligible insurer, or health insurance 


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1 coverage issued by a eligible insurer, in a non2 adopting State. 

3 ‘‘(2) NONADOPTING STATES.—This subtitle 

4 shall supersede any and all State laws of a non5 adopting State (whether enacted prior to or after the 

6 date of enactment of this title) insofar as they 

7 may— 

8 ‘‘(A) prohibit an eligible insurer from of9 fering coverage consistent with the harmonized 

10 standards in the nonadopting State; or 

11 ‘‘(B) discriminate against or among eligi12 ble insurers offering or seeking to offer health 

13 insurance coverage consistent with the har14 monized standards in the nonadopting State. 

15 ‘‘(b) SAVINGS CLAUSE AND CONSTRUCTION.— 

16 ‘‘(1) NONAPPLICATION TO ADOPTING STATES.— 

17 Subsection (a) shall not apply with respect to adopt18 ing States. 

19 ‘‘(2) NONAPPLICATION TO CERTAIN INSUR20 ERS.—Subsection (a) shall not apply with respect to 

21 insurers that do not qualify as eligible insurers who 

22 offer health insurance coverage in a nonadopting 

23 State. 

24 ‘‘(3) NONAPPLICATION WHERE OBTAINING RE25 LIEF UNDER STATE LAW.—Subsection (a)(1) shall 


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1 not apply to any State law of a nonadopting State 

2 to the extent necessary to permit individuals or the 

3 insurance department of the State (or other State 

4 agency) to obtain relief under State law to require 

5 an eligible insurer to comply with the terms of the 

6 health insurance coverage issued in a nonadopting 

7 State. In no case shall this paragraph, or any other 

8 provision of this subtitle, be construed to permit a 

9 cause of action on behalf of an individual or any 

10 other person under State law in connection with a 

11 group health plan that is subject to the Employee 

12 Retirement Income Security Act of 1974 or health 

13 insurance coverage issued in connection with such 

14 plan. 

15 ‘‘(4) NONAPPLICATION TO ENFORCE REQUIRE16 MENTS RELATING TO THE COMPENDIUM.—Sub17 section (a)(1) shall not apply to any State law in a 

18 nonadopting State to the extent necessary to provide 

19 the insurance department of the State (or other 

20 state agency) authority to enforce State law require21 ments relating to the harmonized standards that are 

22 not set forth in the terms of the health insurance 

23 coverage issued in a nonadopting State, in a manner 

24 that is consistent with the harmonized standards 

25 and imposes no greater duties or obligations on 


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1 health insurance issuers than the harmonized stand2 ards. 

3 ‘‘(5) NONAPPLICATION TO SUBSECTION

4 (a)(2).—Paragraphs (3) and (4) shall not apply with 

5 respect to subsection (a)(2). 

6 ‘‘(6) NO AFFECT ON PREEMPTION.—In no case 

7 shall this subsection be construed to affect the scope 

8 of the preemption provided for under the Employee 

9 Retirement Income Security Act of 1974. 

10 ‘‘(c) EFFECTIVE DATE.—This section shall apply be11 ginning on the date that is 2 years after the date on which 

12 final regulations are issued by the Secretary under this 

13 subtitle adopting the harmonized standards. 

14 ‘‘SEC. 2934. CIVIL ACTIONS AND JURISDICTION. 

15 ‘‘(a) IN GENERAL.—The district courts of the United 

16 States shall have exclusive jurisdiction over civil actions 

17 involving the interpretation of this subtitle. 

18 ‘‘(b) ACTIONS.—A health insurance issuer may bring 

19 an action in the district courts of the United States for 

20 injunctive or other equitable relief against a nonadopting 

21 State in connection with the application of a State law 

22 that violates this subtitle. 

23 ‘‘(c) VIOLATIONS OF SECTION 2933.—In the case of 

24 a nonadopting State that is in violation of section 

25 2933(a)(2), a health insurance issuer may bring an action 


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1 in the district courts of the United States for damages 

2 against the nonadopting State and, if the health insurance 

3 issuer prevails in such action, the district court shall 

4 award the health insurance issuer its reasonable attorneys 

5 fees and costs. 

6 ‘‘SEC. 2935. AUTHORIZATION OF APPROPRIATIONS. 

7 ‘‘There are authorized to be appropriated such sums 

8 as may be necessary to carry out this subtitle.’’. 

9 SECTION 1. SHORT TITLE; TABLE OF CONTENTS; PURPOSE. 

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

11 ‘‘Health Insurance Marketplace Modernization and Afford12 ability Act of 2006’’. 

13 (b) TABLE OF CONTENTS.—The table of contents is as 

14 follows: 

Sec. 1. Short title; table of contents; purposes. 

TITLE I—SMALL BUSINESS HEALTH PLANS 

Sec. 101. Rules governing small business health plans. 

Sec. 102. Cooperation between Federal and State authorities. 

Sec. 103. Effective date and transitional and other rules. 

TITLE II—MARKET RELIEF 

Sec. 201. Market relief. 

TITLE III—HARMONIZATION OF HEALTH INSURANCE STANDARDS 

Sec. 301. Health Insurance Standards Harmonization. 

15 (c) PURPOSES.—It is the purpose of this Act to— 

16 (1) make more affordable health insurance op17 tions available to small businesses, working families, 

18 and all Americans; 


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1 (2) assure effective State regulatory protection of 

2 the interests of health insurance consumers; and 

3 (3) create a more efficient and affordable health 

4 insurance marketplace through collaborative develop5 ment of uniform regulatory standards. 

6 TITLE I—SMALL BUSINESS 

7 HEALTH PLANS 

8 SEC. 101. RULES GOVERNING SMALL BUSINESS HEALTH 

9 PLANS. 

10 (a) IN GENERAL.—Subtitle B of title I of the Employee 

11 Retirement Income Security Act of 1974 is amended by 

12 adding after part 7 the following new part: 

13 ‘‘PART 8—RULES GOVERNING SMALL BUSINESS 

14 HEALTH PLANS 

15 ‘‘SEC. 801. SMALL BUSINESS HEALTH PLANS. 

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

17 ‘small business health plan’ means a fully insured group 

18 health plan whose sponsor is (or is deemed under this part 

19 to be) described in subsection (b). 

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

21 plan is described in this subsection if such sponsor— 

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

23 with a constitution and bylaws specifically stating its 

24 purpose and providing for periodic meetings on at 

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1 tion, a bona fide industry association (including a 

2 rural electric cooperative association or a rural tele3 phone cooperative association), a bona fide profes4 sional association, or a bona fide chamber of com5 merce (or similar bona fide business association, in6 cluding a corporation or similar organization that 

7 operates on a cooperative basis (within the meaning 

8 of section 1381 of the Internal Revenue Code of 

9 1986)), for substantial purposes other than that of ob10 taining medical care; 

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

12 receives the active support of its members and re13 quires for membership payment on a periodic basis of 

14 dues or payments necessary to maintain eligibility 

15 for membership; 

16 ‘‘(3) does not condition membership, such dues or 

17 payments, or coverage under the plan on the basis of 

18 health status-related factors with respect to the em19 ployees of its members (or affiliated members), or the 

20 dependents of such employees, and does not condition 

21 such dues or payments on the basis of group health 

22 plan participation; and 

23 ‘‘(4) does not condition membership on the basis 

24 of a minimum group size. 


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1 Any sponsor consisting of an association of entities which 

2 meet the requirements of paragraphs (1), (2), (3), and (4) 

3 shall be deemed to be a sponsor described in this subsection. 

4 ‘‘SEC. 802. CERTIFICATION OF SMALL BUSINESS HEALTH 

5 PLANS. 

6 ‘‘(a) IN GENERAL.—Not later than 6 months after the 

7 date of enactment of this part, the applicable authority shall 

8 prescribe by interim final rule a procedure under which the 

9 applicable authority shall certify small business health 

10 plans which apply for certification as meeting the require11 ments of this part. 

12 ‘‘(b) REQUIREMENTS APPLICABLE TO CERTIFIED

13 PLANS.—A small business health plan with respect to which 

14 certification under this part is in effect shall meet the appli15 cable requirements of this part, effective on the date of cer16 tification (or, if later, on the date on which the plan is 

17 to commence operations). 

18 ‘‘(c) REQUIREMENTS FOR CONTINUED CERTIFI19 CATION.—The applicable authority may provide by regula20 tion for continued certification of small business health 

21 plans under this part. Such regulation shall provide for the 

22 revocation of a certification if the applicable authority finds 

23 that the small business health plan involved is failing to 

24 comply with the requirements of this part. 

25 ‘‘(d) EXPEDITED AND DEEMED CERTIFICATION.— 


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1 ‘‘(1) IN GENERAL.—If the Secretary fails to act 

2 on an application for certification under this section 

3 within 90 days of receipt of such application, the ap4 plying small business health plan shall be deemed cer5 tified until such time as the Secretary may deny for 

6 cause the application for certification. 

7 ‘‘(2) CIVIL PENALTY.—The Secretary may assess 

8 a civil penalty against the board of trustees and plan 

9 sponsor (jointly and severally) of a small business 

10 health plan that is deemed certified under paragraph 

11 (1) of up to $500,000 in the event the Secretary deter12 mines that the application for certification of such 

13 small business health plan was willfully or with gross 

14 negligence incomplete or inaccurate. 

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

16 BOARDS OF TRUSTEES. 

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

18 are met with respect to a small business health plan if the 

19 sponsor has met (or is deemed under this part to have met) 

20 the requirements of section 801(b) for a continuous period 

21 of not less than 3 years ending with the date of the applica22 tion for certification under this part. 

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

24 subsection are met with respect to a small business health 

25 plan if the following requirements are met: 


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

2 pursuant to a plan document, by a board of trustees 

3 which pursuant to a trust agreement has complete fis4 cal control over the plan and which is responsible for 

5 all operations of the plan. 

6 ‘‘(2) RULES OF OPERATION AND FINANCIAL CON7 TROLS.—The board of trustees has in effect rules of 

8 operation and financial controls, based on a 3-year 

9 plan of operation, adequate to carry out the terms of 

10 the plan and to meet all requirements of this title ap11 plicable to the plan. 

12 ‘‘(3) RULES GOVERNING RELATIONSHIP TO PAR13 TICIPATING EMPLOYERS AND TO CONTRACTORS.— 

14 ‘‘(A) BOARD MEMBERSHIP.— 

15 ‘‘(i) IN GENERAL.—Except as provided 

16 in clauses (ii) and (iii), the members of the 

17 board of trustees are individuals selected 

18 from individuals who are the owners, offi19 cers, directors, or employees of the partici20 pating employers or who are partners in the 

21 participating employers and actively par22 ticipate in the business. 

23 ‘‘(ii) LIMITATION.— 

24 ‘‘(I) GENERAL RULE.—Except as 

25 provided in subclauses (II) and (III), 


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1 no such member is an owner, officer, 

2 director, or employee of, or partner in, 

3 a contract administrator or other serv4 ice provider to the plan. 

5 ‘‘(II) LIMITED EXCEPTION FOR

6 PROVIDERS OF SERVICES SOLELY ON

7 BEHALF OF THE SPONSOR.—Officers or 

8 employees of a sponsor which is a serv9 ice provider (other than a contract ad10 ministrator) to the plan may be mem11 bers of the board if they constitute not 

12 more than 25 percent of the member13 ship of the board and they do not pro14 vide services to the plan other than on 

15 behalf of the sponsor. 

16 ‘‘(III) TREATMENT OF PROVIDERS

17 OF MEDICAL CARE.—In the case of a 

18 sponsor which is an association whose 

19 membership consists primarily of pro20 viders of medical care, subclause (I) 

21 shall not apply in the case of any serv22 ice provider described in subclause (I) 

23 who is a provider of medical care 

24 under the plan. 


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1 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

2 Clause (i) shall not apply to a small busi3 ness health plan which is in existence on the 

4 date of the enactment of the Health Insur5 ance Marketplace Modernization and Af6 fordability Act of 2006. 

7 ‘‘(B) SOLE AUTHORITY.—The board has sole 

8 authority under the plan to approve applications 

9 for participation in the plan and to contract 

10 with insurers. 

11 ‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In the 

12 case of a group health plan which is established and main13 tained by a franchiser for a franchise network consisting 

14 of its franchisees— 

15 ‘‘(1) the requirements of subsection (a) and sec16 tion 801(a) shall be deemed met if such requirements 

17 would otherwise be met if the franchiser were deemed 

18 to be the sponsor referred to in section 801(b), such 

19 network were deemed to be an association described in 

20 section 801(b), and each franchisee were deemed to be 

21 a member (of the association and the sponsor) referred 

22 to in section 801(b); and 

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

24 be deemed met. 


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1 The Secretary may by regulation define for purposes of this 

2 subsection the terms ‘franchiser’, ‘franchise network’, and 

3 ‘franchisee’. 

4 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE5 MENTS. 

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

7 requirements of this subsection are met with respect to a 

8 small business health plan if, under the terms of the plan— 

9 ‘‘(1) each participating employer must be— 

10 ‘‘(A) a member of the sponsor; 

11 ‘‘(B) the sponsor; or 

12 ‘‘(C) an affiliated member of the sponsor, 

13 except that, in the case of a sponsor which is a 

14 professional association or other individual-based 

15 association, if at least one of the officers, direc16 tors, or employees of an employer, or at least one 

17 of the individuals who are partners in an em18 ployer and who actively participates in the busi19 ness, is a member or such an affiliated member 

20 of the sponsor, participating employers may also 

21 include such employer; and 

22 ‘‘(2) all individuals commencing coverage under 

23 the plan after certification under this part must be— 

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

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


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1 employees of, or partners in, participating em2 ployers; or 

3 ‘‘(B) the dependents of individuals described 

4 in subparagraph (A). 

5 ‘‘(b) INDIVIDUAL MARKET UNAFFECTED.—The re6 quirements of this subsection are met with respect to a small 

7 business health plan if, under the terms of the plan, no par8 ticipating employer may provide health insurance coverage 

9 in the individual market for any employee not covered 

10 under the plan which is similar to the coverage contempora11 neously provided to employees of the employer under the 

12 plan, if such exclusion of the employee from coverage under 

13 the plan is based on a health status-related factor with re14 spect to the employee and such employee would, but for such 

15 exclusion on such basis, be eligible for coverage under the 

16 plan. 

17 ‘‘(c) PROHIBITION OF DISCRIMINATION AGAINST EM18 PLOYERS AND EMPLOYEES ELIGIBLE TO PARTICIPATE.— 

19 The requirements of this subsection are met with respect to 

20 a small business health plan if— 

21 ‘‘(1) under the terms of the plan, all employers 

22 meeting the preceding requirements of this section are 

23 eligible to qualify as participating employers for all 

24 geographically available coverage options, unless, in 

25 the case of any such employer, participation or conVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00074 Fmt 6652 Sfmt 6203 E:\BILLS\S1955.RS S1955

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1 tribution requirements of the type referred to in sec2 tion 2711 of the Public Health Service Act are not 

3 met; 

4 ‘‘(2) information regarding all coverage options 

5 available under the plan is made readily available to 

6 any employer eligible to participate; and 

7 ‘‘(3) the applicable requirements of sections 701, 

8 702, and 703 are met with respect to the plan. 

9 ‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOC10 UMENTS, CONTRIBUTION RATES, AND BEN11 EFIT OPTIONS. 

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

13 are met with respect to a small business health plan if the 

14 following requirements are met: 

15 ‘‘(1) CONTENTS OF GOVERNING INSTRUMENTS.— 

16 ‘‘(A) IN GENERAL.—The instruments gov17 erning the plan include a written instrument, 

18 meeting the requirements of an instrument re19 quired under section 402(a)(1), which— 

20 ‘‘(i) provides that the board of trustees 

21 serves as the named fiduciary required for 

22 plans under section 402(a)(1) and serves in 

23 the capacity of a plan administrator (re24 ferred to in section 3(16)(A)); and 


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1 ‘‘(ii) provides that the sponsor of the 

2 plan is to serve as plan sponsor (referred to 

3 in section 3(16)(B)). 

4 ‘‘(B) DESCRIPTION OF MATERIAL PROVI5 SIONS.—The terms of the health insurance cov6 erage (including the terms of any individual cer7 tificates that may be offered to individuals in 

8 connection with such coverage) describe the mate9 rial benefit and rating, and other provisions set 

10 forth in this section and such material provi11 sions are included in the summary plan descrip12 tion. 

13 ‘‘(2) CONTRIBUTION RATES MUST BE NON14 DISCRIMINATORY.— 

15 ‘‘(A) IN GENERAL.—The contribution rates 

16 for any participating small employer shall not 

17 vary on the basis of any health status-related 

18 factor in relation to employees of such employer 

19 or their beneficiaries and shall not vary on the 

20 basis of the type of business or industry in which 

21 such employer is engaged. 

22 ‘‘(B) EFFECT OF TITLE.—Nothing in this 

23 title or any other provision of law shall be con24 strued to preclude a health insurance issuer of25 fering health insurance coverage in connection 


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1 with a small business health plan, and at the re2 quest of such small business health plan, from— 

3 ‘‘(i) setting contribution rates for the 

4 small business health plan based on the 

5 claims experience of the plan so long as any 

6 variation in such rates complies with the 

7 requirements of clause (ii), except that 

8 small business health plans shall not be sub9 ject to paragraphs (1)(A) and (3) of section 

10 2911(b) of the Public Health Service Act; or 

11 ‘‘(ii) varying contribution rates for 

12 participating employers in a small business 

13 health plan in a State to the extent that 

14 such rates could vary using the same meth15 odology employed in such State for regu16 lating small group premium rates, subject 

17 to the terms of part I of subtitle A of title 

18 XXIX of the Public Health Service Act (re19 lating to rating requirements), as added by 

20 title II of the Health Insurance Marketplace 

21 Modernization and Affordability Act of 

22 2006. 

23 ‘‘(3) EXCEPTIONS REGARDING SELF-EMPLOYED

24 AND LARGE EMPLOYERS.— 

25 ‘‘(A) SELF EMPLOYED.— 


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1 ‘‘(i) IN GENERAL.—Small business 

2 health plans with participating employers 

3 who are self-employed individuals (and 

4 their dependents) shall enroll such self-em5 ployed participating employers in accord6 ance with rating rules that do not violate 

7 the rating rules for self-employed individ8 uals in the State in which such self-em9 ployed participating employers are located. 

10 ‘‘(ii) GUARANTEE ISSUE.—Small busi11 ness health plans with participating em12 ployers who are self-employed individuals 

13 (and their dependents) may decline to guar14 antee issue to such participating employers 

15 in States in which guarantee issue is not 

16 otherwise required for the self-employed in 

17 that State. 

18 ‘‘(B) LARGE EMPLOYERS.—Small business 

19 health plans with participating employers that 

20 are larger than small employers (as defined in 

21 section 808(a)(10)) shall enroll such large par22 ticipating employers in accordance with rating 

23 rules that do not violate the rating rules for large 

24 employers in the State in which such large par25 ticipating employers are located. 


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1 ‘‘(4) REGULATORY REQUIREMENTS.—Such other 

2 requirements as the applicable authority determines 

3 are necessary to carry out the purposes of this part, 

4 which shall be prescribed by the applicable authority 

5 by regulation. 

6 ‘‘(b) ABILITY OF SMALL BUSINESS HEALTH PLANS TO

7 DESIGN BENEFIT OPTIONS.—Nothing in this part or any 

8 provision of State law (as defined in section 514(c)(1)) shall 

9 be construed to preclude a small business health plan or 

10 a health insurance issuer offering health insurance coverage 

11 in connection with a small business health plan from exer12 cising its sole discretion in selecting the specific benefits and 

13 services consisting of medical care to be included as benefits 

14 under such plan or coverage, except that such benefits and 

15 services must meet the terms and specifications of part II 

16 of subtitle A of title XXIX of the Public Health Service Act 

17 (relating to lower cost plans), as added by title II of the 

18 Health Insurance Marketplace Modernization and Afford19 ability Act of 2006. 

20 ‘‘(c) DOMICILE AND NON-DOMICILE STATES.— 

21 ‘‘(1) DOMICILE STATE.—Coverage shall be issued 

22 to a small business health plan in the State in which 

23 the sponsor’s principal place of business is located. 

24 ‘‘(2) NON-DOMICILE STATES.—With respect to a 

25 State (other than the domicile State) in which parVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00079 Fmt 6652 Sfmt 6203 E:\BILLS\S1955.RS S1955

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1 ticipating employers of a small business health plan 

2 are located but in which the insurer of the small busi3 ness health plan in the domicile State is not yet li4 censed, the following shall apply: 

5 ‘‘(A) TEMPORARY PREEMPTION.—If, upon 

6 the expiration of the 90-day period following the 

7 submission of a licensure application by such in8 surer (that includes a certified copy of an ap9 proved licensure application as submitted by 

10 such insurer in the domicile State) to such State, 

11 such State has not approved or denied such ap12 plication, such State’s health insurance licensure 

13 laws shall be temporarily preempted and the in14 surer shall be permitted to operate in such State, 

15 subject to the following terms: 

16 ‘‘(i) APPLICATION OF NON-DOMICILE

17 STATE LAW.—Except with respect to licen18 sure and with respect to the terms of sub19 title A of title XXIX of the Public Health 

20 Service Act (relating to rating and benefits 

21 as added by the Health Insurance Market22 place Modernization and Affordability Act 

23 of 2006), the laws and authority of the non24 domicile State shall remain in full force 

25 and effect. 


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1 ‘‘(ii) REVOCATION OF PREEMPTION.— 

2 The preemption of a non-domicile State’s 

3 health insurance licensure laws pursuant to 

4 this subparagraph, shall be terminated upon 

5 the occurrence of either of the following: 

6 ‘‘(I) APPROVAL OR DENIAL OF AP7 PLICATION.—The approval of denial of 

8 an insurer’s licensure application, fol9 lowing the laws and regulations of the 

10 non-domicile State with respect to li11 censure. 

12 ‘‘(II) DETERMINATION OF MATE13 RIAL VIOLATION.—A determination by 

14 a non-domicile State that an insurer 

15 operating in a non-domicile State pur16 suant to the preemption provided for 

17 in this subparagraph is in material 

18 violation of the insurance laws (other 

19 than licensure and with respect to the 

20 terms of subtitle A of title XXIX of the 

21 Public Health Service Act (relating to 

22 rating and benefits added by the 

23 Health Insurance Marketplace Mod24 ernization and Affordability Act of 

25 2006)) of such State. 


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1 ‘‘(B) NO PROHIBITION ON PROMOTION.— 

2 Nothing in this paragraph shall be construed to 

3 prohibit a small business health plan or an in4 surer from promoting coverage prior to the expi5 ration of the 90-day period provided for in sub6 paragraph (A), except that no enrollment or col7 lection of contributions shall occur before the ex8 piration of such 90-day period. 

9 ‘‘(C) LICENSURE.—Except with respect to 

10 the application of the temporary preemption 

11 provision of this paragraph, nothing in this part 

12 shall be construed to limit the requirement that 

13 insurers issuing coverage to small business health 

14 plans shall be licensed in each State in which the 

15 small business health plans operate. 

16 ‘‘(D) SERVICING BY LICENSED INSURERS.— 

17 Notwithstanding subparagraph (C), the require18 ments of this subsection may also be satisfied if 

19 the participating employers of a small business 

20 health plan are serviced by a licensed insurer in 

21 that State, even where such insurer is not the in22 surer of such small business health plan in the 

23 State in which such small business health plan 

24 is domiciled. 


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1 ‘‘SEC. 806. REQUIREMENTS FOR APPLICATION AND RE2 LATED REQUIREMENTS. 

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

4 pursuant to section 802(a), a small business 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 small business 

11 health plans. 

12 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICATION

13 FOR CERTIFICATION.—An application for certification 

14 under this part meets the requirements of this section only 

15 if it includes, in a manner and form which shall be pre16 scribed by the applicable authority by regulation, at least 

17 the following 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 of 

22 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 the 


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1 number of them expected to be located in each such 

2 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 oper7 ations. 

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

10 trust agreements), the summary plan description, and 

11 other material describing the benefits that will be pro12 vided to participants and beneficiaries under the 

13 plan. 

14 ‘‘(5) AGREEMENTS WITH SERVICE PROVIDERS.— 

15 A copy of any agreements between the plan, health in16 surance issuer, and contract administrators and other 

17 service providers. 

18 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

19 STATES.—A certification granted under this part to a 

20 small business health plan shall not be effective unless writ21 ten notice of such certification is filed with the applicable 

22 State authority of each State in which the small business 

23 health plans operate. 

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

25 any small business health plan certified under this part, 


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1 descriptions of material changes in any information which 

2 was required to be submitted with the application for the 

3 certification under this part shall be filed in such form and 

4 manner as shall be prescribed by the applicable authority 

5 by regulation. The applicable authority may require by reg6 ulation prior notice of material changes with respect to 

7 specified matters which might serve as the basis for suspen8 sion or revocation of the certification. 

9 ‘‘SEC. 807. NOTICE REQUIREMENTS FOR VOLUNTARY TER10 MINATION. 

11 ‘‘A small business health plan which is or has been 

12 certified under this part may terminate (upon or at any 

13 time after cessation of accruals in benefit liabilities) only 

14 if the board of trustees, not less than 60 days before the 

15 proposed termination date— 

16 ‘‘(1) provides to the participants and bene17 ficiaries a written notice of intent to terminate stat18 ing that such termination is intended and the pro19 posed termination date; 

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

21 of the plan in connection with such termination in a 

22 manner which will result in timely payment of all 

23 benefits for which the plan is obligated; and 

24 ‘‘(3) submits such plan in writing to the appli25 cable authority. 


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1 Actions required under this section shall be taken in such 

2 form and manner as may be prescribed by the applicable 

3 authority by regulation. 

4 ‘‘SEC. 808. DEFINITIONS AND RULES OF CONSTRUCTION. 

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

6 ‘‘(1) AFFILIATED MEMBER.—The term ‘affiliated 

7 member’ means, in connection with a sponsor— 

8 ‘‘(A) a person who is otherwise eligible to be 

9 a member of the sponsor but who elects an affili10 ated status with the sponsor, or 

11 ‘‘(B) in the case of a sponsor with members 

12 which consist of associations, a person who is a 

13 member or employee of any such association and 

14 elects an affiliated status with the sponsor. 

15 ‘‘(2) APPLICABLE AUTHORITY.—The term ‘appli16 cable authority’ means the Secretary of Labor, except 

17 that, in connection with any exercise of the Sec18 retary’s authority with respect to which the Secretary 

19 is required under section 506(d) to consult with a 

20 State, such term means the Secretary, in consultation 

21 with such State. 

22 ‘‘(3) APPLICABLE STATE AUTHORITY.—The term 

23 ‘applicable State authority’ means, with respect to a 

24 health insurance issuer in a State, the State insur25 ance commissioner or official or officials designated 


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1 by the State to enforce the requirements of title XXVII 

2 of the Public Health Service Act for the State involved 

3 with respect to such issuer. 

4 ‘‘(4) GROUP HEALTH PLAN.—The term ‘group 

5 health plan’ has the meaning provided in section 

6 733(a)(1) (after applying subsection (b) of this sec7 tion). 

8 ‘‘(5) HEALTH INSURANCE COVERAGE.—The term 

9 ‘health insurance coverage’ has the meaning provided 

10 in section 733(b)(1), except that such term shall not 

11 include excepted benefits (as defined in section 

12 733(c)). 

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

14 ‘health insurance issuer’ has the meaning provided in 

15 section 733(b)(2). 

16 ‘‘(7) INDIVIDUAL MARKET.— 

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

18 market’ means the market for health insurance 

19 coverage offered to individuals other than in con20 nection with a group health plan. 

21 ‘‘(B) TREATMENT OF VERY SMALL

22 GROUPS.— 

23 ‘‘(i) IN GENERAL.—Subject to clause 

24 (ii), such term includes coverage offered in 

25 connection with a group health plan that 


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1 has fewer than 2 participants as current 

2 employees or participants described in sec3 tion 732(d)(3) on the first day of the plan 

4 year. 

5 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

6 shall not apply in the case of health insur7 ance coverage offered in a State if such 

8 State regulates the coverage described in 

9 such clause in the same manner and to the 

10 same extent as coverage in the small group 

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

12 the Public Health Service Act) is regulated 

13 by such State. 

14 ‘‘(8) MEDICAL CARE.—The term ‘medical care’ 

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

16 ‘‘(9) PARTICIPATING EMPLOYER.—The term ‘par17 ticipating employer’ means, in connection with a 

18 small business health plan, any employer, if any in19 dividual who is an employee of such employer, a 

20 partner in such employer, or a self-employed indi21 vidual who is such employer (or any dependent, as 

22 defined under the terms of the plan, of such indi23 vidual) is or was covered under such plan in connec24 tion with the status of such individual as such an emVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00088 Fmt 6652 Sfmt 6203 E:\BILLS\S1955.RS S1955

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1 ployee, partner, or self-employed individual in rela2 tion to the plan. 

3 ‘‘(10) SMALL EMPLOYER.—The term ‘small em4 ployer’ means, in connection with a group health 

5 plan with respect to a plan year, a small employer 

6 as defined in section 2791(e)(4). 

7 ‘‘(11) TRADE ASSOCIATION AND PROFESSIONAL

8 ASSOCIATION.—The terms ‘trade association’ and 

9 ‘professional association’ mean an entity that meets 

10 the requirements of section 1.501(c)(6)-1 of title 26, 

11 Code of Federal Regulations (as in effect on the date 

12 of enactment of this Act). 

13 ‘‘(b) RULE OF CONSTRUCTION.—For purposes of deter14 mining whether a plan, fund, or program is an employee 

15 welfare benefit plan which is a small business health plan, 

16 and for purposes of applying this title in connection with 

17 such plan, fund, or program so determined to be such an 

18 employee welfare benefit plan— 

19 ‘‘(1) in the case of a partnership, the term ‘em20 ployer’ (as defined in section 3(5)) includes the part21 nership in relation to the partners, and the term ‘em22 ployee’ (as defined in section 3(6)) includes any part23 ner in relation to the partnership; and 

24 ‘‘(2) in the case of a self-employed individual, 

25 the term ‘employer’ (as defined in section 3(5)) and 


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1 the term ‘employee’ (as defined in section 3(6)) shall 

2 include such individual. 

3 ‘‘(c) RENEWAL.—Notwithstanding any provision of 

4 law to the contrary, a participating employer in a small 

5 business health plan shall not be deemed to be a plan spon6 sor in applying requirements relating to coverage renewal. 

7 ‘‘(d) HEALTH SAVINGS ACCOUNTS.—Nothing in this 

8 part shall be construed to inhibit the development of health 

9 savings accounts pursuant to section 223 of the Internal 

10 Revenue Code of 1986.’’. 

11 (b) CONFORMING AMENDMENTS TO PREEMPTION

12 RULES.— 

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

14 1144(b)(6)) is amended by adding at the end the fol15 lowing new subparagraph: 

16 ‘‘(E) The preceding subparagraphs of this paragraph 

17 do not apply with respect to any State law in the case of 

18 a small business health plan which is certified under part 

19 8.’’. 

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

21 amended— 

22 (A) in subsection (b)(4), by striking ‘‘Sub23 section (a)’’ and inserting ‘‘Subsections (a) and 

24 (d)’’; 


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1 (B) in subsection (b)(5), by striking ‘‘sub2 section (a)’’ in subparagraph (A) and inserting 

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

4 (a)(2)(B) and (b) of section 805’’, and by strik5 ing ‘‘subsection (a)’’ in subparagraph (B) and 

6 inserting ‘‘subsection (a) of this section or sub7 section (a)(2)(B) or (b) of section 805’’; 

8 (C) by redesignating subsection (d) as sub9 section (e); and 

10 (D) by inserting after subsection (c) the fol11 lowing new subsection: 

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

13 provisions of this title shall supersede any and all State 

14 laws insofar as they may now or hereafter preclude a health 

15 insurance issuer from offering health insurance coverage in 

16 connection with a small business health plan which is cer17 tified under part 8. 

18 ‘‘(2) In any case in which health insurance coverage 

19 of any policy type is offered under a small business health 

20 plan certified under part 8 to a participating employer op21 erating in such State, the provisions of this title shall super22 sede any and all laws of such State insofar as they may 

23 establish rating and benefit requirements that would other24 wise apply to such coverage, provided the requirements of 

25 subtitle A of title XXIX of the Public Health Service Act 


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1 (as added by title II of the Health Insurance Marketplace 

2 Modernization and Affordability Act of 2006) (concerning 

3 health plan rating and benefits) are met.’’. 

4 (c) PLAN SPONSOR.—Section 3(16)(B) of such Act (29 

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

6 following new sentence: ‘‘Such term also includes a person 

7 serving as the sponsor of a small business health plan under 

8 part 8.’’. 

9 (d) SAVINGS CLAUSE.—Section 731(c) of such Act is 

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

11 (e) CLERICAL AMENDMENT.—The table of contents in 

12 section 1 of the Employee Retirement Income Security Act 

13 of 1974 is amended by inserting after the item relating to 

14 section 734 the following new items: 

‘‘PART 8—RULES GOVERNING SMALL BUSINESS HEALTH PLANS

‘‘801. Small business health plans. 

‘‘802. Certification of small business health plans. 

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

‘‘804. Participation and coverage requirements. 

‘‘805. Other requirements relating to plan documents, contribution rates, and benefit options. 

‘‘806. Requirements for application and related requirements. 

‘‘807. Notice requirements for voluntary termination. 

‘‘808. Definitions and rules of construction.’’. 

15 SEC. 102. COOPERATION BETWEEN FEDERAL AND STATE 

16 AUTHORITIES. 

17 Section 506 of the Employee Retirement Income Secu18 rity Act of 1974 (29 U.S.C. 1136) is amended by adding 

19 at the end the following new subsection: 


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1 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT TO

2 SMALL BUSINESS HEALTH PLANS.— 

3 ‘‘(1) AGREEMENTS WITH STATES.—The Sec4 retary shall consult with the State recognized under 

5 paragraph (2) with respect to a small business health 

6 plan regarding the exercise of— 

7 ‘‘(A) the Secretary’s authority under sec8 tions 502 and 504 to enforce the requirements for 

9 certification under part 8; and 

10 ‘‘(B) the Secretary’s authority to certify 

11 small business health plans under part 8 in ac12 cordance with regulations of the Secretary appli13 cable to certification under part 8. 

14 ‘‘(2) RECOGNITION OF DOMICILE STATE.—In 

15 carrying out paragraph (1), the Secretary shall en16 sure that only one State will be recognized, with re17 spect to any particular small business health plan, as 

18 the State with which consultation is required. In car19 rying out this paragraph such State shall be the 

20 domicile State, as defined in section 805(c).’’. 

21 SEC. 103. EFFECTIVE DATE AND TRANSITIONAL AND OTHER 

22 RULES. 

23 (a) EFFECTIVE DATE.—The amendments made by this 

24 title shall take effect 12 months after the date of the enact25 ment of this Act. The Secretary of Labor shall first issue 


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1 all regulations necessary to carry out the amendments made 

2 by this title within 6 months after the date of the enactment 

3 of this Act. 

4 (b) TREATMENT OF CERTAIN EXISTING HEALTH BEN5 EFITS PROGRAMS.— 

6 (1) IN GENERAL.—In any case in which, as of 

7 the date of the enactment of this Act, an arrangement 

8 is maintained in a State for the purpose of providing 

9 benefits consisting of medical care for the employees 

10 and beneficiaries of its participating employers, at 

11 least 200 participating employers make contributions 

12 to such arrangement, such arrangement has been in 

13 existence for at least 10 years, and such arrangement 

14 is licensed under the laws of one or more States to 

15 provide such benefits to its participating employers, 

16 upon the filing with the applicable authority (as de17 fined in section 808(a)(2) of the Employee Retirement 

18 Income Security Act of 1974 (as amended by this sub19 title)) by the arrangement of an application for cer20 tification of the arrangement under part 8 of subtitle 

21 B of title I of such Act— 

22 (A) such arrangement shall be deemed to be 

23 a group health plan for purposes of title I of 

24 such Act; 


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1 (B) the requirements of sections 801(a) and 

2 803(a) of the Employee Retirement Income Secu3 rity Act of 1974 shall be deemed met with respect 

4 to such arrangement; 

5 (C) the requirements of section 803(b) of 

6 such Act shall be deemed met, if the arrangement 

7 is operated by a board of trustees which— 

8 (i) is elected by the participating em9 ployers, with each employer having one 

10 vote; and 

11 (ii) has complete fiscal control over the 

12 arrangement and which is responsible for 

13 all operations of the arrangement; 

14 (D) the requirements of section 804(a) of 

15 such Act shall be deemed met with respect to 

16 such arrangement; and 

17 (E) the arrangement may be certified by 

18 any applicable authority with respect to its oper19 ations in any State only if it operates in such 

20 State on the date of certification. 

21 The provisions of this subsection shall cease to apply 

22 with respect to any such arrangement at such time 

23 after the date of the enactment of this Act as the ap24 plicable requirements of this subsection are not met 

25 with respect to such arrangement or at such time that 


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1 the arrangement provides coverage to participants 

2 and beneficiaries in any State other than the States 

3 in which coverage is provided on such date of enact4 ment. 

5 (2) DEFINITIONS.—For purposes of this sub6 section, the terms ‘‘group health plan’’, ‘‘medical 

7 care’’, and ‘‘participating employer’’ shall have the 

8 meanings provided in section 808 of the Employee 

9 Retirement Income Security Act of 1974, except that 

10 the reference in paragraph (7) of such section to an 

11 ‘‘small business health plan’’ shall be deemed a ref12 erence to an arrangement referred to in this sub13 section. 

14 TITLE II—MARKET RELIEF 

15 SEC. 201. MARKET RELIEF. 

16 The Public Health Service Act (42 U.S.C. 201 et seq.) 

17 is amended by adding at the end the following: 

18 ‘‘TITLE XXIX—HEALTH CARE IN19 SURANCE MARKETPLACE 

20 MODERNIZATION 

21 ‘‘SEC. 2901. GENERAL INSURANCE DEFINITIONS. 

22 ‘‘In this title, the terms ‘health insurance coverage’, 

23 ‘health insurance issuer’, ‘group health plan’, and ‘indi24 vidual health insurance’ shall have the meanings given such 

25 terms in section 2791. 


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1 ‘‘Subtitle A—Market Relief 

2 ‘‘PART I—RATING REQUIREMENTS 

3 ‘‘SEC. 2911. DEFINITIONS. 

4 ‘‘(a) GENERAL DEFINITIONS.—In this part: 

5 ‘‘(1) ADOPTING STATE.—The term ‘adopting 

6 State’ means a State that, with respect to the small 

7 group market, has enacted either the Model Small 

8 Group Rating Rules or, if applicable to such State, 

9 the Transitional Model Small Group Rating Rules, 

10 each in their entirety and as the exclusive laws of the 

11 State that relate to rating in the small group insur12 ance market. 

13 ‘‘(2) APPLICABLE STATE AUTHORITY.—The term 

14 ‘applicable State authority’ means, with respect to a 

15 health insurance issuer in a State, the State insur16 ance commissioner or official or officials designated 

17 by the State to enforce the insurance laws of such 

18 State. 

19 ‘‘(3) BASE PREMIUM RATE.—The term ‘base pre20 mium rate’ means, for each class of business with re21 spect to a rating period, the lowest premium rate 

22 charged or that could have been charged under a rat23 ing system for that class of business by the small em24 ployer carrier to small employers with similar case 


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1 characteristics for health benefit plans with the same 

2 or similar coverage 

3 ‘‘(4) ELIGIBLE INSURER.—The term ‘eligible in4 surer’ means a health insurance issuer that is licensed 

5 in a State and that— 

6 ‘‘(A) notifies the Secretary, not later than 

7 30 days prior to the offering of coverage de8 scribed in this subparagraph, that the issuer in9 tends to offer health insurance coverage con10 sistent with the Model Small Group Rating 

11 Rules or, as applicable, transitional small group 

12 rating rules in a State; 

13 ‘‘(B) notifies the insurance department of a 

14 nonadopting State (or other State agency), not 

15 later than 30 days prior to the offering of cov16 erage described in this subparagraph, that the 

17 issuer intends to offer small group health insur18 ance coverage in that State consistent with the 

19 Model Small Group Rating Rules, and provides 

20 with such notice a copy of any insurance policy 

21 that it intends to offer in the State, its most re22 cent annual and quarterly financial reports, and 

23 any other information required to be filed with 

24 the insurance department of the State (or other 

25 State agency); and 


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1 ‘‘(C) includes in the terms of the health in2 surance coverage offered in nonadopting States 

3 (including in the terms of any individual certifi4 cates that may be offered to individuals in con5 nection with such group health coverage) and 

6 filed with the State pursuant to subparagraph 

7 (B), a description in the insurer’s contract of the 

8 Model Small Group Rating Rules and an affir9 mation that such Rules are included in the terms 

10 of such contract. 

11 ‘‘(5) HEALTH INSURANCE COVERAGE.—The term 

12 ‘health insurance coverage’ means any coverage issued 

13 in the small group health insurance market, except 

14 that such term shall not include excepted benefits (as 

15 defined in section 2791(c)). 

16 ‘‘(6) INDEX RATE.—The term ‘index rate’ means 

17 for each class of business with respect to the rating 

18 period for small employers with similar case charac19 teristics, the arithmetic average of the applicable base 

20 premium rate and the corresponding highest premium 

21 rate. 

22 ‘‘(7) MODEL SMALL GROUP RATING RULES.—The 

23 term ‘ Model Small Group Rating Rules’ means the 

24 rules set forth in subsection (b). 


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1 ‘‘(8) NONADOPTING STATE.—The term ‘non2 adopting State’ means a State that is not an adopt3 ing State. 

4 ‘‘(9) SMALL GROUP INSURANCE MARKET.—The 

5 term ‘small group insurance market’ shall have the 

6 meaning given the term ‘small group market’ in sec7 tion 2791(e)(5). 

8 ‘‘(10) STATE LAW.—The term ‘State law’ means 

9 all laws, decisions, rules, regulations, or other State 

10 actions (including actions by a State agency) having 

11 the effect of law, of any State. 

12 ‘‘(b) DEFINITION RELATING TO MODEL SMALL GROUP

13 RATING RULES.—The term ‘Model Small Group Rating 

14 Rules’ means adapted rating rules drawn from the Adopted 

15 Small Employer Health Insurance Availability Model Act 

16 of 1993 of the National Association of Insurance Commis17 sioners consisting of the following: 

18 ‘‘(1) PREMIUM RATES.—Premium rates for 

19 health benefit plans to which this title applies shall 

20 be subject to the following provisions relating to pre21 miums: 

22 ‘‘(A) INDEX RATE.—The index rate for a 

23 rating period for any class of business shall not 

24 exceed the index rate for any other class of busi25 ness by more than 20 percent. 


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1 ‘‘(B) CLASS OF BUSINESSES.—With respect 

2 to a class of business, the premium rates charged 

3 during a rating period to small employers with 

4 similar case characteristics for the same or simi5 lar coverage or the rates that could be charged to 

6 such employers under the rating system for that 

7 class of business, shall not vary from the index 

8 rate by more than 25 percent of the index rate 

9 under subparagraph (A). 

10 ‘‘(C) INCREASES FOR NEW RATING PERI11 ODS.—The percentage increase in the premium 

12 rate charged to a small employer for a new rat13 ing period may not exceed the sum of the fol14 lowing: 

15 ‘‘(i) The percentage change in the new 

16 business premium rate measured from the 

17 first day of the prior rating period to the 

18 first day of the new rating period. In the 

19 case of a health benefit plan into which the 

20 small employer carrier is no longer enroll21 ing new small employers, the small em22 ployer carrier shall use the percentage 

23 change in the base premium rate, except 

24 that such change shall not exceed, on a per25 centage basis, the change in the new busiVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00101 Fmt 6652 Sfmt 6203 E:\BILLS\S1955.RS S1955

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1 ness premium rate for the most similar 

2 health benefit plan into which the small em3 ployer carrier is actively enrolling new 

4 small employers. 

5 ‘‘(ii) Any adjustment, not to exceed 15 

6 percent annually and adjusted pro rata for 

7 rating periods of less then 1 year, due to the 

8 claim experience, health status or duration 

9 of coverage of the employees or dependents 

10 of the small employer as determined from 

11 the small employer carrier’s rate manual 

12 for the class of business involved. 

13 ‘‘(iii) Any adjustment due to change in 

14 coverage or change in the case characteris15 tics of the small employer as determined 

16 from the small employer carrier’s rate man17 ual for the class of business. 

18 ‘‘(D) UNIFORM APPLICATION OF ADJUST19 MENTS.—Adjustments in premium rates for 

20 claim experience, health status, or duration of 

21 coverage shall not be charged to individual em22 ployees or dependents. Any such adjustment shall 

23 be applied uniformly to the rates charged for all 

24 employees and dependents of the small employer. 


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1 ‘‘(E) USE OF INDUSTRY AS A CASE CHAR2 ACTERISTIC.—A small employer carrier may uti3 lize industry as a case characteristic in estab4 lishing premium rates, so long as the highest 

5 rate factor associated with any industry classi6 fication does not exceed the lowest rate factor as7 sociated with any industry classification by 

8 more than 15 percent. 

9 ‘‘(F) CONSISTENT APPLICATION OF FAC10 TORS.—Small employer carriers shall apply rat11 ing factors, including case characteristics, con12 sistently with respect to all small employers in 

13 a class of business. Rating factors shall produce 

14 premiums for identical groups which differ only 

15 by the amounts attributable to plan design and 

16 do not reflect differences due to the nature of the 

17 groups assumed to select particular health benefit 

18 plans. 

19 ‘‘(G) TREATMENT OF PLANS AS HAVING

20 SAME RATING PERIOD.—A small employer car21 rier shall treat all health benefit plans issued or 

22 renewed in the same calendar month as having 

23 the same rating period. 

24 ‘‘(H) RESTRICTED NETWORK PROVISIONS.— 

25 For purposes of this subsection, a health benefit 


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1 plan that contains a restricted network provision 

2 shall not be considered similar coverage to a 

3 health benefit plan that does not contain a simi4 lar provision if the restriction of benefits to net5 work providers results in substantial differences 

6 in claims costs. 

7 ‘‘(I) PROHIBITION ON USE OF CERTAIN

8 CASE CHARACTERISTICS.—The small employer 

9 carrier shall not use case characteristics other 

10 than age, gender, industry, geographic area, 

11 family composition, group size, and participa12 tion in wellness programs without prior ap13 proval of the applicable State authority. 

14 ‘‘(J) REQUIRE COMPLIANCE.—Premium 

15 rates for small business health benefit plans shall 

16 comply with the requirements of this subsection 

17 notwithstanding any assessments paid or pay18 able by a small employer carrier as required by 

19 a State’s small employer carrier reinsurance 

20 program. 

21 ‘‘(2) ESTABLISHMENT OF SEPARATE CLASS OF

22 BUSINESS.—Subject to paragraph (3), a small em23 ployer carrier may establish a separate class of busi24 ness only to reflect substantial differences in expected 


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1 claims experience or administrative costs related to 

2 the following: 

3 ‘‘(A) The small employer carrier uses more 

4 than one type of system for the marketing and 

5 sale of health benefit plans to small employers. 

6 ‘‘(B) The small employer carrier has ac7 quired a class of business from another small em8 ployer carrier. 

9 ‘‘(C) The small employer carrier provides 

10 coverage to one or more association groups that 

11 meet the requirements of this title. 

12 ‘‘(3) LIMITATION.—A small employer carrier 

13 may establish up to 9 separate classes of business 

14 under paragraph (2), excluding those classes of busi15 ness related to association groups under this title. 

16 ‘‘(4) ADDITIONAL GROUPINGS.—The applicable 

17 State authority may approve the establishment of ad18 ditional distinct groupings by small employer car19 riers upon the submission of an application to the ap20 plicable State authority and a finding by the applica21 ble State authority that such action would enhance 

22 the efficiency and fairness of the small employer in23 surance marketplace. 

24 ‘‘(5) LIMITATION ON TRANSFERS.—A small em25 ployer carrier shall not transfer a small employer inVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00105 Fmt 6652 Sfmt 6203 E:\BILLS\S1955.RS S1955

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1 voluntarily into or out of a class of business. A small 

2 employer carrier shall not offer to transfer a small 

3 employer into or out of a class of business unless such 

4 offer is made to transfer all small employers in the 

5 class of business without regard to case characteris6 tics, claim experience, health status or duration of 

7 coverage since issue. 

8 ‘‘(6) SUSPENSION OF THE RULES.—The applica9 ble State authority may suspend, for a specified pe10 riod, the application of paragraph (1) to the pre11 mium rates applicable to one or more small employ12 ers included within a class of business of a small em13 ployer carrier for one or more rating periods upon a 

14 filing by the small employer carrier and a finding by 

15 the applicable State authority either that the suspen16 sion is reasonable when considering the financial con17 dition of the small employer carrier or that the sus18 pension would enhance the efficiency and fairness of 

19 the marketplace for small employer health insurance. 

20 ‘‘SEC. 2912. RATING RULES. 

21 ‘‘(a) IMPLEMENTATION OF MODEL SMALL GROUP RAT22 ING RULES.—Not later than 6 months after the enactment 

23 of this title, the Secretary shall promulgate regulations im24 plementing the Model Small Group Rating Rules pursuant 

25 to section 2911(b). 


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1 ‘‘(b) TRANSITIONAL MODEL SMALL GROUP RATING

2 RULES.— 

3 ‘‘(1) IN GENERAL.—Not later than 6 months 

4 after the date of enactment of this title and to the ex5 tent necessary to provide for a graduated transition 

6 to the Model Small Group Rating Rules, the Sec7 retary, in consultation with the NAIC, shall promul8 gate Transitional Model Small Group Rating Rules 

9 in accordance with this subsection, which shall be ap10 plicable with respect to certain non-adopting States 

11 for a period of not to exceed 5 years from the date 

12 of the promulgation of the Model Small Group Rating 

13 Rules pursuant to subsection (a). After the expiration 

14 of such 5-year period, the transitional model small 

15 group rating rules shall expire, and the Model Small 

16 Group Rating Rules shall then apply with respect to 

17 all non-adopting States pursuant to the provisions of 

18 this part. 

19 ‘‘(2) PREMIUM VARIATION DURING TRANSI20 TION.— 

21 ‘‘(A) TRANSITION STATES.—During the 

22 transition period described in paragraph (1), 

23 small group health insurance coverage offered in 

24 a non-adopting State that had in place premium 

25 rating band requirements or premium limits 


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1 that varied by less than 12.5 percent from the 

2 index rate within a class of business on the date 

3 of enactment of this title, shall not be subject to 

4 the premium variation provision of section 

5 2911(b)(1) of the Model Small Group Rating 

6 Rules and shall instead be subject to the Transi7 tional Model Small Group Rating Rules as pro8 mulgated by the Secretary pursuant to para9 graph (1). 

10 ‘‘(B) NON-TRANSITION STATES.—During the 

11 transition period described in paragraph (1), 

12 and thereafter, small group health insurance cov13 erage offered in a non-adopting State that had 

14 in place premium rating band requirements or 

15 premium limits that varied by more than 12.5 

16 percent from the index rate within a class of 

17 business on the date of enactment of this title, 

18 shall not be subject to the Transitional Model 

19 Small Group Rating Rules as promulgated by 

20 the Secretary pursuant to paragraph (1), and 

21 instead shall be subject to the Model Small 

22 Group Rating Rules effective beginning with the 

23 first plan year or calendar year following the 

24 promulgation of such Rules, at the election of the 

25 eligible insurer. 


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1 ‘‘(3) TRANSITIONING OF OLD BUSINESS.—In de2 veloping the transitional model small group rating 

3 rules under paragraph (1), the Secretary shall, after 

4 consultation with the National Association of Insur5 ance Commissioners and representatives of insurers 

6 operating in the small group health insurance market, 

7 promulgate special transition standards and 

8 timelines with respect to independent rating classes 

9 for old and new business, to the extent reasonably nec10 essary to protect health insurance consumers and to 

11 ensure a stable and fair transition for old and new 

12 market entrants. 

13 ‘‘(4) OTHER TRANSITIONAL AUTHORITY.—In de14 veloping the Transitional Model Small Group Rating 

15 Rules under paragraph (1), the Secretary shall pro16 vide for the application of the Transitional Model 

17 Small Group Rating Rules in transition States as the 

18 Secretary may determine necessary for a an effective 

19 transition. 

20 ‘‘(c) MARKET RE-ENTRY.— 

21 ‘‘(1) IN GENERAL.—Notwithstanding any other 

22 provision of law, a health insurance issuer that has 

23 voluntarily withdrawn from providing coverage in the 

24 small group market prior to the date of enactment of 

25 the Health Insurance Marketplace Modernization and 


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1 Affordability Act of 2006 shall not be excluded from 

2 re-entering such market on a date that is more than 

3 180 days after such date of enactment. 

4 ‘‘(2) TERMINATION.—The provision of this sub5 section shall terminate on the date that is 24 months 

6 after the date of enactment of the Health Insurance 

7 Marketplace Modernization and Affordability Act of 

8 2006. 

9 ‘‘SEC. 2913. APPLICATION AND PREEMPTION. 

10 ‘‘(a) SUPERSEDING OF STATE LAW.— 

11 ‘‘(1) IN GENERAL.—This part shall supersede 

12 any and all State laws of a non-adopting State inso13 far as such State laws (whether enacted prior to or 

14 after the date of enactment of this subtitle) relate to 

15 rating in the small group insurance market as ap16 plied to an eligible insurer, or small group health in17 surance coverage issued by an eligible insurer, includ18 ing with respect to coverage issued to a small em19 ployer through a small business health plan, in a 

20 State. 

21 ‘‘(2) NONADOPTING STATES.—This part shall su22 persede any and all State laws of a nonadopting 

23 State insofar as such State laws (whether enacted 

24 prior to or after the date of enactment of this sub25 title)— 


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1 ‘‘(A) prohibit an eligible insurer from offer2 ing, marketing, or implementing small group 

3 health insurance coverage consistent with the 

4 Model Small Group Rating Rules or transitional 

5 model small group rating rules; or 

6 ‘‘(B) have the effect of retaliating against or 

7 otherwise punishing in any respect an eligible 

8 insurer for offering, marketing, or implementing 

9 small group health insurance coverage consistent 

10 with the Model Small Group Rating Rules or 

11 transitional model small group rating rules. 

12 ‘‘(b) SAVINGS CLAUSE AND CONSTRUCTION.— 

13 ‘‘(1) NONAPPLICATION TO ADOPTING STATES.— 

14 Subsection (a) shall not apply with respect to adopt15 ing states. 

16 ‘‘(2) NONAPPLICATION TO CERTAIN INSURERS.— 

17 Subsection (a) shall not apply with respect to insur18 ers that do not qualify as eligible insurers that offer 

19 small group health insurance coverage in a non20 adopting State. 

21 ‘‘(3) NONAPPLICATION WHERE OBTAINING RE22 LIEF UNDER STATE LAW.—Subsection (a)(1) shall not 

23 supercede any State law in a nonadopting State to 

24 the extent necessary to permit individuals or the in25 surance department of the State (or other State agenVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00111 Fmt 6652 Sfmt 6203 E:\BILLS\S1955.RS S1955

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1 cy) to obtain relief under State law to require an eli2 gible insurer to comply with the Model Small Group 

3 Rating Rules or transitional model small group rat4 ing rules. 

5 ‘‘(4) NO EFFECT ON PREEMPTION.—In no case 

6 shall this part be construed to limit or affect in any 

7 manner the preemptive scope of sections 502 and 514 

8 of the Employee Retirement Income Security Act of 

9 1974. In no case shall this part be construed to create 

10 any cause of action under Federal or State law or en11 large or affect any remedy available under the Em12 ployee Retirement Income Security Act of 1974 

13 ‘‘(c) EFFECTIVE DATE.—This section shall apply, at 

14 the election of the eligible insurer, beginning in the first 

15 plan year or the first calendar year following the issuance 

16 of the final rules by the Secretary under the Model Small 

17 Group Rating Rules or, as applicable, the Transitional 

18 Model Small Group Rating Rules, but in no event earlier 

19 than the date that is 12 months after the date of enactment 

20 of this title. 

21 ‘‘SEC. 2914. CIVIL ACTIONS AND JURISDICTION. 

22 ‘‘(a) IN GENERAL.—The courts of the United States 

23 shall have exclusive jurisdiction over civil actions involving 

24 the interpretation of this part. 


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1 ‘‘(b) ACTIONS.—An eligible insurer may bring an ac2 tion in the district courts of the United States for injunctive 

3 or other equitable relief against any officials or agents of 

4 a nonadopting State in connection with any conduct or ac5 tion, or proposed conduct or action, by such officials or 

6 agents which violates, or which would if undertaken violate, 

7 section 2913. 

8 ‘‘(c) DIRECT FILING IN COURT OF APPEALS.—At the 

9 election of the eligible insurer, an action may be brought 

10 under subsection (b) directly in the United States Court of 

11 Appeals for the circuit in which the nonadopting State is 

12 located by the filing of a petition for review in such Court. 

13 ‘‘(d) EXPEDITED REVIEW.— 

14 ‘‘(1) DISTRICT COURT.—In the case of an action 

15 brought in a district court of the United States under 

16 subsection (b), such court shall complete such action, 

17 including the issuance of a judgment, prior to the end 

18 of the 120-day period beginning on the date on which 

19 such action is filed, unless all parties to such pro20 ceeding agree to an extension of such period. 

21 ‘‘(2) COURT OF APPEALS.—In the case of an ac22 tion brought directly in a United States Court of Ap23 peal under subsection (c), or in the case of an appeal 

24 of an action brought in a district court under sub25 section (b), such Court shall complete all action on the 


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1 petition, including the issuance of a judgment, prior 

2 to the end of the 60-day period beginning on the date 

3 on which such petition is filed with the Court, unless 

4 all parties to such proceeding agree to an extension 

5 of such period. 

6 ‘‘(e) STANDARD OF REVIEW.—A court in an action 

7 filed under this section, shall render a judgment based on 

8 a review of the merits of all questions presented in such 

9 action and shall not defer to any conduct or action, or pro10 posed conduct or action, of a nonadopting State. 

11 ‘‘SEC. 2915. ONGOING REVIEW. 

12 ‘‘Not later than 5 years after the date on which the 

13 Model Small Group Rating Rules are issued under this 

14 part, and every 5 years thereafter, the Secretary, in con15 sultation with the National Association of Insurance Com16 missioners, shall prepare and submit to the appropriate 

17 committees of Congress a report that assesses the effect of 

18 the Model Small Group Rating Rules on access, cost, and 

19 market functioning in the small group market. Such report 

20 may, if the Secretary, in consultation with the National 

21 Association of Insurance Commissioners, determines such is 

22 appropriate for improving access, costs, and market func23 tioning, contain legislative proposals for recommended 

24 modification to such Model Small Group Rating Rules. 


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1 ‘‘PART II—AFFORDABLE PLANS 

2 ‘‘SEC. 2921. DEFINITIONS. 

3 ‘‘In this part: 

4 ‘‘(1) ADOPTING STATE.—The term ‘adopting 

5 State’ means a State that has enacted the Benefit 

6 Choice Standards in their entirety and as the exclu7 sive laws of the State that relate to benefit, service, 

8 and provider mandates in the group and individual 

9 insurance markets. 

10 ‘‘(2) BENEFIT CHOICE STANDARDS.—The term 

11 ‘Benefit Choice Standards’ means the Standards 

12 issued under section 2922. 

13 ‘‘(3) ELIGIBLE INSURER.—The term ‘eligible in14 surer’ means a health insurance issuer that is licensed 

15 in a nonadopting State and that— 

16 ‘‘(A) notifies the Secretary, not later than 

17 30 days prior to the offering of coverage de18 scribed in this subparagraph, that the issuer in19 tends to offer health insurance coverage con20 sistent with the Benefit Choice Standards in a 

21 nonadopting State; 

22 ‘‘(B) notifies the insurance department of a 

23 nonadopting State (or other State agency), not 

24 later than 30 days prior to the offering of cov25 erage described in this subparagraph, that the 

26 issuer intends to offer health insurance coverage 


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1 in that State consistent with the Benefit Choice 

2 Standards, and provides with such notice a copy 

3 of any insurance policy that it intends to offer 

4 in the State, its most recent annual and quar5 terly financial reports, and any other informa6 tion required to be filed with the insurance de7 partment of the State (or other State agency) by 

8 the Secretary in regulations; and 

9 ‘‘(C) includes in the terms of the health in10 surance coverage offered in nonadopting States 

11 (including in the terms of any individual certifi12 cates that may be offered to individuals in con13 nection with such group health coverage) and 

14 filed with the State pursuant to subparagraph 

15 (B), a description in the insurer’s contract of the 

16 Benefit Choice Standards and that adherence to 

17 such Standards is included as a term of such 

18 contract. 

19 ‘‘(4) HEALTH INSURANCE COVERAGE.—The term 

20 ‘health insurance coverage’ means any coverage issued 

21 in the group or individual health insurance markets, 

22 except that such term shall not include excepted bene23 fits (as defined in section 2791(c)). 


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1 ‘‘(5) NONADOPTING STATE.—The term ‘non2 adopting State’ means a State that is not an adopt3 ing State. 

4 ‘‘(6) SMALL GROUP INSURANCE MARKET.—The 

5 term ‘small group insurance market’ shall have the 

6 meaning given the term ‘small group market’ in sec7 tion 2791(e)(5). 

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

9 all laws, decisions, rules, regulations, or other State 

10 actions (including actions by a State agency) having 

11 the effect of law, of any State. 

12 ‘‘SEC. 2922. OFFERING AFFORDABLE PLANS. 

13 ‘‘(a) BENEFIT CHOICE OPTIONS.— 

14 ‘‘(1) DEVELOPMENT.—Not later than 6 months 

15 after the date of enactment of this title, the Secretary 

16 shall issue, by interim final rule, Benefit Choice 

17 Standards that implement the standards provided for 

18 in this part. 

19 ‘‘(2) BASIC OPTIONS.—The Benefit Choice 

20 Standards shall provide that a health insurance 

21 issuer in a State, may offer a coverage plan or plan 

22 in the small group market, individual market, large 

23 group market, or through a small business health 

24 plan, that does not comply with one or more man25 dates regarding covered benefits, services, or category 


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1 of provider as may be in effect in such State with re2 spect to such market or markets (either prior to or fol3 lowing the date of enactment of this title), if such 

4 issuer also offers in such market or markets an en5 hanced option as provided for in paragraph (3). 

6 ‘‘(3) ENHANCED OPTION.—A health insurance 

7 issuer issuing a basic option as provided for in para8 graph (2) shall also offer to purchasers (including, 

9 with respect to a small business health plan, the par10 ticipating employers of such plan) an enhanced op11 tion, which shall at a minimum include such covered 

12 benefits, services, and categories of providers as are 

13 covered by a State employee coverage plan in one of 

14 the 5 most populous States as are in effect in the cal15 endar year in which such enhanced option is offered. 

16 ‘‘(4) PUBLICATION OF BENEFITS.—Not later 

17 than 3 months after the date of enactment of this title, 

18 and on the first day of every calendar year thereafter, 

19 the Secretary shall publish in the Federal Register 

20 such covered benefits, services, and categories of pro21 viders covered in that calendar year by the State em22 ployee coverage plans in the 5 most populous States. 

23 ‘‘(b) EFFECTIVE DATES.— 

24 ‘‘(1) SMALL BUSINESS HEALTH PLANS.—With 

25 respect to health insurance provided to participating 


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1 employers of small business health plans, the require2 ments of this part (concerning lower cost plans) shall 

3 apply beginning on the date that is 12 months after 

4 the date of enactment of this title. 

5 ‘‘(2) NON-ASSOCIATION COVERAGE.—With respect 

6 to health insurance provided to groups or individuals 

7 other than participating employers of small business 

8 health plans, the requirements of this part shall apply 

9 beginning on the date that is 15 months after the date 

10 of enactment of this title. 

11 ‘‘SEC. 2923. APPLICATION AND PREEMPTION. 

12 ‘‘(a) SUPERCEDING OF STATE LAW.— 

13 ‘‘(1) IN GENERAL.—This part shall supersede 

14 any and all State laws insofar as such laws relate to 

15 mandates relating to covered benefits, services, or cat16 egories of provider in the health insurance market as 

17 applied to an eligible insurer, or health insurance 

18 coverage issued by an eligible insurer, including with 

19 respect to coverage issued to a small business health 

20 plan, in a nonadopting State. 

21 ‘‘(2) NONADOPTING STATES.—This part shall su22 persede any and all State laws of a nonadopting 

23 State (whether enacted prior to or after the date of 

24 enactment of this title) insofar as such laws— 


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1 ‘‘(A) prohibit an eligible insurer from offer2 ing, marketing, or implementing health insur3 ance coverage consistent with the Benefit Choice 

4 Standards, as provided for in section 2922(a); or 

5 ‘‘(B) have the effect of retaliating against or 

6 otherwise punishing in any respect an eligible 

7 insurer for offering, marketing, or implementing 

8 health insurance coverage consistent with the 

9 Benefit Choice Standards. 

10 ‘‘(b) SAVINGS CLAUSE AND CONSTRUCTION.— 

11 ‘‘(1) NONAPPLICATION TO ADOPTING STATES.— 

12 Subsection (a) shall not apply with respect to adopt13 ing States. 

14 ‘‘(2) NONAPPLICATION TO CERTAIN INSURERS.— 

15 Subsection (a) shall not apply with respect to insur16 ers that do not qualify as eligible insurers who offer 

17 health insurance coverage in a nonadopting State. 

18 ‘‘(3) NONAPPLICATION WHERE OBTAINING RE19 LIEF UNDER STATE LAW.—Subsection (a)(1) shall not 

20 supercede any State law of a nonadopting State to 

21 the extent necessary to permit individuals or the in22 surance department of the State (or other State agen23 cy) to obtain relief under State law to require an eli24 gible insurer to comply with the Benefit Choice 

25 Standards. 


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1 ‘‘(4) NO EFFECT ON PREEMPTION.—In no case 

2 shall this part be construed to limit or affect in any 

3 manner the preemptive scope of sections 502 and 514 

4 of the Employee Retirement Income Security Act of 

5 1974. In no case shall this part be construed to create 

6 any cause of action under Federal or State law or en7 large or affect any remedy available under the Em8 ployee Retirement Income Security Act of 1974 

9 ‘‘SEC. 2924. CIVIL ACTIONS AND JURISDICTION. 

10 ‘‘(a) IN GENERAL.—The courts of the United States 

11 shall have exclusive jurisdiction over civil actions involving 

12 the interpretation of this part. 

13 ‘‘(b) ACTIONS.—An eligible insurer may bring an ac14 tion in the district courts of the United States for injunctive 

15 or other equitable relief against any officials or agents of 

16 a nonadopting State in connection with any conduct or ac17 tion, or proposed conduct or action, by such officials or 

18 agents which violates, or which would if undertaken violate, 

19 section 2923. 

20 ‘‘(c) DIRECT FILING IN COURT OF APPEALS.—At the 

21 election of the eligible insurer, an action may be brought 

22 under subsection (b) directly in the United States Court of 

23 Appeals for the circuit in which the nonadopting State is 

24 located by the filing of a petition for review in such Court. 

25 ‘‘(d) EXPEDITED REVIEW.— 


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1 ‘‘(1) DISTRICT COURT.—In the case of an action 

2 brought in a district court of the United States under 

3 subsection (b), such court shall complete such action, 

4 including the issuance of a judgment, prior to the end 

5 of the 120-day period beginning on the date on which 

6 such action is filed, unless all parties to such pro7 ceeding agree to an extension of such period. 

8 ‘‘(2) COURT OF APPEALS.—In the case of an ac9 tion brought directly in a United States Court of Ap10 peal under subsection (c), or in the case of an appeal 

11 of an action brought in a district court under sub12 section (b), such Court shall complete all action on the 

13 petition, including the issuance of a judgment, prior 

14 to the end of the 60-day period beginning on the date 

15 on which such petition is filed with the Court, unless 

16 all parties to such proceeding agree to an extension 

17 of such period. 

18 ‘‘(e) STANDARD OF REVIEW.—A court in an action 

19 filed under this section, shall render a judgment based on 

20 a review of the merits of all questions presented in such 

21 action and shall not defer to any conduct or action, or pro22 posed conduct or action, of a nonadopting State. 

23 ‘‘SEC. 2925. RULES OF CONSTRUCTION. 

24 ‘‘(a) IN GENERAL.—Notwithstanding any other provi25 sion of Federal or State law, a health insurance issuer in 


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1 an adopting State or an eligible insurer in a non-adopting 

2 State may amend its existing policies to be consistent with 

3 the terms of this subtitle (concerning rating and benefits). 

4 ‘‘(b) HEALTH SAVINGS ACCOUNTS.—Nothing in this 

5 subtitle shall be construed to inhibit the development of 

6 health savings accounts pursuant to section 223 of the Inter7 nal Revenue Code of 1986.’’. 

8 TITLE III—HARMONIZATION OF 

9 HEALTH INSURANCE STAND10 ARDS 

11 SEC. 301. HEALTH INSURANCE STANDARDS HARMONI12 ZATION. 

13 Title XXIX of the Public Health Service Act (as added 

14 by section 201) is amended by adding at the end the fol15 lowing: 

16 ‘‘Subtitle B—Standards 

17 Harmonization 

18 ‘‘SEC. 2931. DEFINITIONS. 

19 ‘‘In this subtitle: 

20 ‘‘(1) ADOPTING STATE.—The term ‘adopting 

21 State’ means a State that has enacted the harmonized 

22 standards adopted under this subtitle in their entirety 

23 and as the exclusive laws of the State that relate to 

24 the harmonized standards. 


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1 ‘‘(2) ELIGIBLE INSURER.—The term ‘eligible in2 surer’ means a health insurance issuer that is licensed 

3 in a nonadopting State and that— 

4 ‘‘(A) notifies the Secretary, not later than 

5 30 days prior to the offering of coverage de6 scribed in this subparagraph, that the issuer in7 tends to offer health insurance coverage con8 sistent with the harmonized standards in a non9 adopting State; 

10 ‘‘(B) notifies the insurance department of a 

11 nonadopting State (or other State agency), not 

12 later than 30 days prior to the offering of cov13 erage described in this subparagraph, that the 

14 issuer intends to offer health insurance coverage 

15 in that State consistent with the harmonized 

16 standards published pursuant to section 2932(d), 

17 and provides with such notice a copy of any in18 surance policy that it intends to offer in the 

19 State, its most recent annual and quarterly fi20 nancial reports, and any other information re21 quired to be filed with the insurance department 

22 of the State (or other State agency) by the Sec23 retary in regulations; and 

24 ‘‘(C) includes in the terms of the health in25 surance coverage offered in nonadopting States 


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1 (including in the terms of any individual certifi2 cates that may be offered to individuals in con3 nection with such health coverage) and filed with 

4 the State pursuant to subparagraph (B), a de5 scription of the harmonized standards published 

6 pursuant to section 2932(g)(2) and an affirma7 tion that such standards are a term of the con8 tract. 

9 ‘‘(3) HARMONIZED STANDARDS.—The term ‘har10 monized standards’ means the standards certified by 

11 the Secretary under section 2932(d). 

12 ‘‘(4) HEALTH INSURANCE COVERAGE.—The term 

13 ‘health insurance coverage’ means any coverage issued 

14 in the health insurance market, except that such term 

15 shall not include excepted benefits (as defined in sec16 tion 2791(c). 

17 ‘‘(5) NONADOPTING STATE.—The term ‘non18 adopting State’ means a State that fails to enact, 

19 within 18 months of the date on which the Secretary 

20 certifies the harmonized standards under this subtitle, 

21 the harmonized standards in their entirety and as the 

22 exclusive laws of the State that relate to the har23 monized standards. 

24 ‘‘(6) STATE LAW.—The term ‘State law’ means 

25 all laws, decisions, rules, regulations, or other State 


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1 actions (including actions by a State agency) having 

2 the effect of law, of any State. 

3 ‘‘SEC. 2932. HARMONIZED STANDARDS. 

4 ‘‘(a) BOARD.— 

5 ‘‘(1) ESTABLISHMENT.—Not later than 3 months 

6 after the date of enactment of this title, the Secretary, 

7 in consultation with the NAIC, shall establish the 

8 Health Insurance Consensus Standards Board (re9 ferred to in this subtitle as the ‘Board’) to develop 

10 recommendations that harmonize inconsistent State 

11 health insurance laws in accordance with the proce12 dures described in subsection (b). 

13 ‘‘(2) COMPOSITION.— 

14 ‘‘(A) IN GENERAL.—The Board shall be 

15 composed of the following voting members to be 

16 appointed by the Secretary after considering the 

17 recommendations of professional organizations 

18 representing the entities and constituencies de19 scribed in this paragraph: 

20 ‘‘(i) Four State insurance commis21 sioners as recommended by the National As22 sociation of Insurance Commissioners, of 

23 which 2 shall be Democrats and 2 shall be 

24 Republicans, and of which one shall be desVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00126 Fmt 6652 Sfmt 6203 E:\BILLS\S1955.RS S1955

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1 ignated as the chairperson and one shall be 

2 designated as the vice chairperson. 

3 ‘‘(ii) Four representatives of State gov4 ernment, two of which shall be governors of 

5 States and two of which shall be State legis6 lators, and two of which shall be Democrats 

7 and two of which shall be Republicans. 

8 ‘‘(iii) Four representatives of health in9 surers, of which one shall represent insurers 

10 that offer coverage in the small group mar11 ket, one shall represent insurers that offer 

12 coverage in the large group market, one 

13 shall represent insurers that offer coverage 

14 in the individual market, and one shall rep15 resent carriers operating in a regional mar16 ket. 

17 ‘‘(iv) Two representatives of insurance 

18 agents and brokers. 

19 ‘‘(v) Two independent representatives 

20 of the American Academy of Actuaries who 

21 have familiarity with the actuarial methods 

22 applicable to health insurance. 

23 ‘‘(B) EX OFFICIO MEMBER.—A representa24 tive of the Secretary shall serve as an ex officio 

25 member of the Board. 


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1 ‘‘(3) ADVISORY PANEL.—The Secretary shall es2 tablish an advisory panel to provide advice to the 

3 Board, and shall appoint its members after consid4 ering the recommendations of professional organiza5 tions representing the entities and constituencies 

6 identified in this paragraph: 

7 ‘‘(A) Two representatives of small business 

8 health plans. 

9 ‘‘(B) Two representatives of employers, of 

10 which one shall represent small employers and 

11 one shall represent large employers. 

12 ‘‘(C) Two representatives of consumer orga13 nizations. 

14 ‘‘(D) Two representatives of health care pro15 viders. 

16 ‘‘(4) QUALIFICATIONS.—The membership of the 

17 Board shall include individuals with national rec18 ognition for their expertise in health finance and eco19 nomics, actuarial science, health plans, providers of 

20 health services, and other related fields, who provide 

21 a mix of different professionals, broad geographic rep22 resentation, and a balance between urban and rural 

23 representatives. 

24 ‘‘(5) ETHICAL DISCLOSURE.—The Secretary shall 

25 establish a system for public disclosure by members of 


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1 the Board of financial and other potential conflicts of 

2 interest relating to such members. Members of the 

3 Board shall be treated as employees of Congress for 

4 purposes of applying title I of the Ethics in Govern5 ment Act of 1978 (Public Law 95–521). 

6 ‘‘(6) DIRECTOR AND STAFF.—Subject to such re7 view as the Secretary deems necessary to assure the 

8 efficient administration of the Board, the chair and 

9 vice-chair of the Board may— 

10 ‘‘(A) employ and fix the compensation of an 

11 Executive Director (subject to the approval of the 

12 Comptroller General) and such other personnel 

13 as may be necessary to carry out its duties 

14 (without regard to the provisions of title 5, 

15 United States Code, governing appointments in 

16 the competitive service); 

17 ‘‘(B) seek such assistance and support as 

18 may be required in the performance of its duties 

19 from appropriate Federal departments and agen20 cies; 

21 ‘‘(C) enter into contracts or make other ar22 rangements, as may be necessary for the conduct 

23 of the work of the Board (without regard to sec24 tion 3709 of the Revised Statutes (41 U.S.C. 5)); 


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1 ‘‘(D) make advance, progress, and other 

2 payments which relate to the work of the Board; 

3 ‘‘(E) provide transportation and subsistence 

4 for persons serving without compensation; and 

5 ‘‘(F) prescribe such rules as it deems nec6 essary with respect to the internal organization 

7 and operation of the Board. 

8 ‘‘(7) TERMS.—The members of the Board shall 

9 serve for the duration of the Board. Vacancies in the 

10 Board shall be filled as needed in a manner consistent 

11 with the composition described in paragraph (2). 

12 ‘‘(b) DEVELOPMENT OF HARMONIZED STANDARDS.— 

13 ‘‘(1) IN GENERAL.—In accordance with the proc14 ess described in subsection (c), the Board shall iden15 tify and recommend nationally harmonized standards 

16 for each of the following process categories: 

17 ‘‘(A) FORM FILING AND RATE FILING.— 

18 Form and rate filing standards shall be estab19 lished which promote speed to market and in20 clude the following defined areas for States that 

21 require such filings: 

22 ‘‘(i) Procedures for form and rate fil23 ing pursuant to a streamlined administra24 tive filing process. 


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1 ‘‘(ii) Timeframes for filings to be re2 viewed by a State if review is required be3 fore they are deemed approved. 

4 ‘‘(iii) Timeframes for an eligible in5 surer to respond to State requests following 

6 its review. 

7 ‘‘(iv) A process for an eligible insurer 

8 to self-certify. 

9 ‘‘(v) State development of form and 

10 rate filing templates that include only non11 preempted State law and Federal law re12 quirements for eligible insurers with timely 

13 updates. 

14 ‘‘(vi) Procedures for the resubmission 

15 of forms and rates. 

16 ‘‘(vii) Disapproval rationale of a form 

17 or rate filing based on material omissions 

18 or violations of non-preempted State law or 

19 Federal law with violations cited and ex20 plained. 

21 ‘‘(viii) For States that may require a 

22 hearing, a rationale for hearings based on 

23 violations of non-preempted State law or 

24 insurer requests. 


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1 ‘‘(B) MARKET CONDUCT REVIEW.—Market 

2 conduct review standards shall be developed 

3 which provide for the following: 

4 ‘‘(i) Mandatory participation in na5 tional databases. 

6 ‘‘(ii) The confidentiality of examina7 tion materials. 

8 ‘‘(iii) The identification of the State 

9 agency with primary responsibility for ex10 aminations. 

11 ‘‘(iv) Consultation and verification of 

12 complaint data with the eligible insurer 

13 prior to State actions. 

14 ‘‘(v) Consistency of reporting require15 ments with the recordkeeping and adminis16 trative practices of the eligible insurer. 

17 ‘‘(vi) Examinations that seek to correct 

18 material errors and harmful business prac19 tices rather than infrequent errors. 

20 ‘‘(vii) Transparency and publishing of 

21 the State’s examination standards. 

22 ‘‘(viii) Coordination of market conduct 

23 analysis. 


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1 ‘‘(ix) Coordination and nonduplication 

2 between State examinations of the same eli3 gible insurer. 

4 ‘‘(x) Rationale and protocols to be met 

5 before a full examination is conducted. 

6 ‘‘(xi) Requirements on examiners prior 

7 to beginning examinations such as budget 

8 planning and work plans. 

9 ‘‘(xii) Consideration of methods to 

10 limit examiners’ fees such as caps, competi11 tive bidding, or other alternatives. 

12 ‘‘(xiii) Reasonable fines and penalties 

13 for material errors and harmful business 

14 practices. 

15 ‘‘(C) PROMPT PAYMENT OF CLAIMS.—The 

16 Board shall establish prompt payment standards 

17 for eligible insurers based on standards similar 

18 to those applicable to the Social Security Act as 

19 set forth in section 1842(c)(2) of such Act (42 

20 U.S.C. 1395u(c)(2)). Such prompt payment 

21 standards shall be consistent with the timing 

22 and notice requirements of the claims procedure 

23 rules to be specified under subparagraph (D), 

24 and shall include appropriate exceptions such as 


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1 for fraud, nonpayment of premiums, or late sub2 mission of claims. 

3 ‘‘(D) INTERNAL REVIEW.—The Board shall 

4 establish standards for claims procedures for eli5 gible insurers that are consistent with the re6 quirements relating to initial claims for benefits 

7 and appeals of claims for benefits under the Em8 ployee Retirement Income Security Act of 1974 

9 as set forth in section 503 of such Act (29 U.S.C. 

10 1133) and the regulations thereunder. 

11 ‘‘(2) RECOMMENDATIONS.—The Board shall rec12 ommend harmonized standards for each element of the 

13 categories described in subparagraph (A) through (D) 

14 of paragraph (1) within each such market. Notwith15 standing the previous sentence, the Board shall not 

16 recommend any harmonized standards that disrupt, 

17 expand, or duplicate the benefit, service, or provider 

18 mandate standards provided in the Benefit Choice 

19 Standards pursuant to section 2922(a). 

20 ‘‘(c) PROCESS FOR IDENTIFYING HARMONIZED STAND21 ARDS.— 

22 ‘‘(1) IN GENERAL.—The Board shall develop rec23 ommendations to harmonize inconsistent State insur24 ance laws with respect to each of the process catVerDate Aug 31 2005 05:21 Apr 28, 2006 Jkt 049200 PO 00000 Frm 00134 Fmt 6652 Sfmt 6203 E:\BILLS\S1955.RS S1955

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1 egories described in subparagraphs (A) through (D) of 

2 subsection (b)(1). 

3 ‘‘(2) REQUIREMENTS.—In adopting standards 

4 under this section, the Board shall consider the fol5 lowing: 

6 ‘‘(A) Any model acts or regulations of the 

7 National Association of Insurance Commis8 sioners in each of the process categories described 

9 in subparagraphs (A) through (D) of subsection 

10 (b)(1). 

11 ‘‘(B) Substantially similar standards fol12 lowed by a plurality of States, as reflected in ex13 isting State laws, relating to the specific process 

14 categories described in subparagraphs (A) 

15 through (D) of subsection (b)(1). 

16 ‘‘(C) Any Federal law requirement related 

17 to specific process categories described in sub18 paragraphs (A) through (D) of subsection (b)(1). 

19 ‘‘(D) In the case of the adoption of any 

20 standard that differs substantially from those re21 ferred to in subparagraphs (A), (B), or (C), the 

22 Board shall provide evidence to the Secretary 

23 that such standard is necessary to protect health 

24 insurance consumers or promote speed to market 

25 or administrative efficiency. 


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1 ‘‘(E) The criteria specified in clauses (i) 

2 through (iii) of subsection (d)(2)(B). 

3 ‘‘(d) RECOMMENDATIONS AND CERTIFICATION BY SEC4 RETARY.— 

5 ‘‘(1) RECOMMENDATIONS.—Not later than 18 

6 months after the date on which all members of the 

7 Board are selected under subsection (a), the Board 

8 shall recommend to the Secretary the certification of 

9 the harmonized standards identified pursuant to sub10 section (c). 

11 ‘‘(2) CERTIFICATION.— 

12 ‘‘(A) IN GENERAL.—Not later than 120 

13 days after receipt of the Board’s recommenda14 tions under paragraph (1), the Secretary shall 

15 certify the recommended harmonized standards 

16 as provided for in subparagraph (B), and issue 

17 such standards in the form of an interim final 

18 regulation. 

19 ‘‘(B) CERTIFICATION PROCESS.—The Sec20 retary shall establish a process for certifying the 

21 recommended harmonized standard, by category, 

22 as recommended by the Board under this section. 

23 Such process shall— 

24 ‘‘(i) ensure that the certified standards 

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1 latory harmonization with respect to health 

2 plans on a national basis; 

3 ‘‘(ii) ensure that the approved stand4 ards are the minimum necessary, with re5 gard to substance and quantity of require6 ments, to protect health insurance con7 sumers and maintain a competitive regu8 latory environment; and 

9 ‘‘(iii) ensure that the approved stand10 ards will not limit the range of group 

11 health plan designs and insurance products, 

12 such as catastrophic coverage only plans, 

13 health savings accounts, and health mainte14 nance organizations, that might otherwise 

15 be available to consumers. 

16 ‘‘(3) EFFECTIVE DATE.—The standards certified 

17 by the Secretary under paragraph (2) shall be effec18 tive on the date that is 18 months after the date on 

19 which the Secretary certifies the harmonized stand20 ards. 

21 ‘‘(e) TERMINATION.—The Board shall terminate and 

22 be dissolved after making the recommendations to the Sec23 retary pursuant to subsection (d)(1). 

24 ‘‘(f) ONGOING REVIEW.—Not earlier than 3 years after 

25 the termination of the Board under subsection (e), and not 


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1 earlier than every 3 years thereafter, the Secretary, in con2 sultation with the National Association of Insurance Com3 missioners and the entities and constituencies represented 

4 on the Board and the Advisory Panel, shall prepare and 

5 submit to the appropriate committees of Congress a report 

6 that assesses the effect of the harmonized standards on ac7 cess, cost, and health insurance market functioning. The 

8 Secretary may, based on such report and applying the proc9 ess established for certification under subsection (d)(2)(B), 

10 in consultation with the National Association of Insurance 

11 Commissioners and the entities and constituencies rep12 resented on the Board and the Advisory Panel, update the 

13 harmonized standards through notice and comment rule14 making. 

15 ‘‘(g) PUBLICATION.— 

16 ‘‘(1) LISTING.—The Secretary shall maintain an 

17 up to date listing of all harmonized standards cer18 tified under this section on the Internet website of the 

19 Department of Health and Human Services. 

20 ‘‘(2) SAMPLE CONTRACT LANGUAGE.—The Sec21 retary shall publish on the Internet website of the De22 partment of Health and Human Services sample con23 tract language that incorporates the harmonized 

24 standards certified under this section, which may be 

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1 surer. The types of harmonized standards that shall 

2 be included in sample contract language are the 

3 standards that are relevant to the contractual bargain 

4 between the insurer and insured. 

5 ‘‘(h) STATE ADOPTION AND ENFORCEMENT.—Not later 

6 than 18 months after the certification by the Secretary of 

7 harmonized standards under this section, the States may 

8 adopt such harmonized standards (and become an adopting 

9 State) and, in which case, shall enforce the harmonized 

10 standards pursuant to State law. 

11 ‘‘SEC. 2933. APPLICATION AND PREEMPTION. 

12 ‘‘(a) SUPERCEDING OF STATE LAW.— 

13 ‘‘(1) IN GENERAL.—The harmonized standards 

14 certified under this subtitle shall supersede any and 

15 all State laws of a non-adopting State insofar as such 

16 State laws relate to the areas of harmonized stand17 ards as applied to an eligible insurer, or health insur18 ance coverage issued by a eligible insurer, including 

19 with respect to coverage issued to a small business 

20 health plan, in a nonadopting State. 

21 ‘‘(2) NONADOPTING STATES.—This subtitle shall 

22 supersede any and all State laws of a nonadopting 

23 State (whether enacted prior to or after the date of 

24 enactment of this title) insofar as they may— 


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1 ‘‘(A) prohibit an eligible insurer from offer2 ing, marketing, or implementing health insur3 ance coverage consistent with the harmonized 

4 standards; or 

5 ‘‘(B) have the effect of retaliating against or 

6 otherwise punishing in any respect an eligible 

7 insurer for offering, marketing, or implementing 

8 health insurance coverage consistent with the 

9 harmonized standards under this subtitle. 

10 ‘‘(b) SAVINGS CLAUSE AND CONSTRUCTION.— 

11 ‘‘(1) NONAPPLICATION TO ADOPTING STATES.— 

12 Subsection (a) shall not apply with respect to adopt13 ing States. 

14 ‘‘(2) NONAPPLICATION TO CERTAIN INSURERS.— 

15 Subsection (a) shall not apply with respect to insur16 ers that do not qualify as eligible insurers who offer 

17 health insurance coverage in a nonadopting State. 

18 ‘‘(3) NONAPPLICATION WHERE OBTAINING RE19 LIEF UNDER STATE LAW.—Subsection (a)(1) shall not 

20 supercede any State law of a nonadopting State to 

21 the extent necessary to permit individuals or the in22 surance department of the State (or other State agen23 cy) to obtain relief under State law to require an eli24 gible insurer to comply with the harmonized stand25 ards under this subtitle. 


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1 ‘‘(4) NO EFFECT ON PREEMPTION.—In no case 

2 shall this subtitle be construed to limit or affect in 

3 any manner the preemptive scope of sections 502 and 

4 514 of the Employee Retirement Income Security Act 

5 of 1974. In no case shall this subtitle be construed to 

6 create any cause of action under Federal or State law 

7 or enlarge or affect any remedy available under the 

8 Employee Retirement Income Security Act of 1974. 

9 ‘‘(c) EFFECTIVE DATE.—This section shall apply be10 ginning on the date that is 18 months after the date on 

11 harmonized standards are certified by the Secretary under 

12 this subtitle. 

13 ‘‘SEC. 2934. CIVIL ACTIONS AND JURISDICTION. 

14 ‘‘(a) IN GENERAL.—The district courts of the United 

15 States shall have exclusive jurisdiction over civil actions in16 volving the interpretation of this subtitle. 

17 ‘‘(b) ACTIONS.—An eligible insurer may bring an ac18 tion in the district courts of the United States for injunctive 

19 or other equitable relief against any officials or agents of 

20 a nonadopting State in connection with any conduct or ac21 tion, or proposed conduct or action, by such officials or 

22 agents which violates, or which would if undertaken violate, 

23 section 2933. 

24 ‘‘(c) DIRECT FILING IN COURT OF APPEALS.—At the 

25 election of the eligible insurer, an action may be brought 


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1 under subsection (b) directly in the United States Court of 

2 Appeals for the circuit in which the nonadopting State is 

3 located by the filing of a petition for review in such Court. 

4 ‘‘(d) EXPEDITED REVIEW.— 

5 ‘‘(1) DISTRICT COURT.—In the case of an action 

6 brought in a district court of the United States under 

7 subsection (b), such court shall complete such action, 

8 including the issuance of a judgment, prior to the end 

9 of the 120-day period beginning on the date on which 

10 such action is filed, unless all parties to such pro11 ceeding agree to an extension of such period. 

12 ‘‘(2) COURT OF APPEALS.—In the case of an ac13 tion brought directly in a United States Court of Ap14 peal under subsection (c), or in the case of an appeal 

15 of an action brought in a district court under sub16 section (b), such Court shall complete all action on the 

17 petition, including the issuance of a judgment, prior 

18 to the end of the 60-day period beginning on the date 

19 on which such petition is filed with the Court, unless 

20 all parties to such proceeding agree to an extension 

21 of such period. 

22 ‘‘(e) STANDARD OF REVIEW.—A court in an action 

23 filed under this section, shall render a judgment based on 

24 a review of the merits of all questions presented in such 


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143 

•S 1955 RS

1 action and shall not defer to any conduct or action, or pro2 posed conduct or action, of a nonadopting State. 

3 ‘‘SEC. 2935. AUTHORIZATION OF APPROPRIATIONS; RULE 

4 OF CONSTRUCTION. 

5 ‘‘(a) AUTHORIZATION OF APPROPRIATIONS.—There 

6 are authorized to be appropriated such sums as may be nec7 essary to carry out this subtitle. 

8 ‘‘(b) HEALTH SAVINGS ACCOUNTS.—Nothing in this 

9 subtitle shall be construed to inhibit the development of 

10 health savings accounts pursuant to section 223 of the Inter11 nal Revenue Code of 1986.’’. 


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Calendar No. 417 

109TH CONGRESS 

2D SESSION S. 1955 

A BILL 

To amend title I of the Employee Retirement Secuhealth insurance marketplace. health plans and through modernization of the costs through the creation of small business Act to expand health care access and reduce rity Act of 1974 and the Public Health Service 

APRIL 27, 2006 

Reported with an amendment 


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