II 

115TH CONGRESS 

1ST SESSION S. 1818 

To provide health care options for small businesses. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 14, 2017 

Mr. ENZI introduced the following bill; which was read twice and referred to 

the Committee on Finance 

A BILL 

To provide health care options for small businesses. 

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

3 SECTION 1. SHORT TITLE. 

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

5 Plans Act of 2017’’. 

6 SEC. 2. SMALL BUSINESS HEALTH PLANS. 

7 (a) IN GENERAL.—Notwithstanding any other provi8 sion of law, with respect to small business health plans— 

9 (1) multiple, unaffiliated small employers may 

10 pool their employees for the purpose of purchasing 

11 health insurance coverage for such employees in the 

12 large group market; 


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1 (2) health insurance issuers may offer health 

2 plans in the large group market to employees of the 

3 small employers described in paragraph (1); and 

4 (3) privately administered health insurance ex5 changes may offer health plans in the large group 

6 market to a pool of employees of multiple, unaffili7 ated small employers. 

8 (b) MULTISTATE PARTICIPATION.—Notwithstanding 

9 any other provision of law, pools of employees described 

10 in subsection (a)(1) may include employers and employees 

11 from multiple States. 

12 (c) TAX TREATMENT OF SMALL BUSINESS HEALTH

13 PLANS.—A small business health plan (as defined in sec14 tion 801(a) of the Employee Retirement Income Security 

15 Act of 1974) shall be treated— 

16 (1) as a group health plan (as defined in sec17 tion 2791 of the Public Health Service Act (42 

18 U.S.C. 300gg–91)) for purposes of applying title 

19 XXVII of the Public Health Service Act (42 U.S.C. 

20 300gg et seq.) and title XXII of such Act (42 

21 U.S.C. 300bb–1); 

22 (2) as a group health plan (as defined in sec23 tion 5000(b)(1) of the Internal Revenue Code of 

24 1986) for purposes of applying sections 4980B and 


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1 5000 and chapter 100 of the Internal Revenue Code 

2 of 1986; and 

3 (3) as a group health plan (as defined in sec4 tion 733(a)(1) of the Employee Retirement Income 

5 Security Act of 1974 (29 U.S.C. 1191b(a)(1))) for 

6 purposes of applying parts 6 and 7 of title I of the 

7 Employee Retirement Income Security Act of 1974 

8 (29 U.S.C. 1161 et seq.). 

9 (d) SMALL BUSINESS HEALTH PLANS.—Subtitle B 

10 of title I of the Employee Retirement Income Security Act 

11 of 1974 is amended by adding at the end the following 

12 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 

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

18 group health plan whose sponsor is described in subsection 

19 (b). 

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

21 plan is described in this subsection if such plan sponsor— 

22 ‘‘(1) receives certification by the Secretary as a 

23 qualified sponsor and files a notice of certification 

24 with the State in which it operates; 


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

2 with a constitution and bylaws specifically stating its 

3 purpose and providing for periodic meetings on at 

4 least an annual basis; 

5 ‘‘(3) is established as a permanent entity; 

6 ‘‘(4) is established for a purpose other than 

7 providing health benefits to its members, such as a 

8 bona fide trade association or a consortium of such 

9 associations, a franchise, or a section 7705 profes10 sional employer organization; and 

11 ‘‘(5) does not condition membership on the 

12 basis of a minimum group size. 

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

14 PLANS. 

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

16 the date of enactment of this part, the Secretary shall pre17 scribe by interim final rule a procedure under which the 

18 Secretary will certify a qualified sponsor of a small busi19 ness health plan. 

20 ‘‘(b) REQUIREMENTS APPLICABLE TO CERTIFIED

21 PLANS.—A small business health plan with respect to 

22 which certification under this part is in effect shall meet 

23 the applicable requirements of this part, effective on the 

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

25 plan is to commence operations). 


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1 ‘‘(c) REQUIREMENTS FOR CONTINUED CERTIFI2 CATION.—The Secretary may provide by regulation for 

3 continued certification of small business health plans 

4 under this part. Such regulation shall provide for the rev5 ocation of a certification if the applicable authority finds 

6 that the small business health plan involved is failing to 

7 comply with the requirements of this part. 

8 ‘‘(d) OVERSIGHT OF CERTIFIED PLANS.—The Sec9 retary shall determine whether any person has violated, 

10 or is about to violate, any provision of this part, including 

11 by conducting periodic reviews of certified small business 

12 health plans in accordance with section 504, and applying 

13 the requirements of sections 518, 519, and 520. 

14 ‘‘(e) EXPEDITED AND DEEMED CERTIFICATION.— 

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

16 on an application for certification under this section 

17 within 180 days of receipt of such application, the 

18 applying small business health plan shall be deemed 

19 certified until such time as the Secretary may deny 

20 for cause the application for certification. 

21 ‘‘(2) CIVIL PENALTY.—The Secretary may as22 sess a civil penalty against the board of trustees, 

23 plan administrator, and plan sponsor (jointly and 

24 severally) of a small business health plan that is 

25 deemed certified under paragraph (1) of up to 


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1 $500,000 in the event the Secretary determines that 

2 the application for certification of such small busi3 ness health plan was willfully or with gross neg4 ligence incomplete or inaccurate. 

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

6 BOARDS OF TRUSTEES. 

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

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

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

10 met) the requirements of section 801(b). 

11 ‘‘(b) BOARD OF TRUSTEES OR PLAN ADMINIS12 TRATOR.—The requirements of this subsection with re13 spect to a small business health plan are as follows: 

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

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

16 or plan administrator which has complete fiscal con17 trol over the plan and which is responsible for all op18 erations of the plan. 

19 ‘‘(2) RULES OF OPERATION AND FINANCIAL

20 CONTROLS.—The board of trustees or plan adminis21 trator has in effect rules of operation and financial 

22 controls, based on a 3-year plan of operation, ade23 quate to carry out the terms of the plan and to meet 

24 all requirements of this title applicable to the plan. 


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1 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

2 PARTICIPATING EMPLOYERS AND TO CONTRAC3 TORS.— 

4 ‘‘(A) BOARD MEMBERSHIP.— 

5 ‘‘(i) IN GENERAL.—With respect to a 

6 plan operated by a board of trustees, ex7 cept as provided in clauses (ii) and (iii), 

8 the members of the board of trustees are 

9 individuals selected from individuals who 

10 are the owners, officers, directors, or em11 ployees of the participating employers or 

12 who are partners in the participating em13 ployers and actively participate in the busi14 ness. 

15 ‘‘(ii) LIMITATION.— 

16 ‘‘(I) GENERAL RULE.—Except as 

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

18 no such member is an owner, officer, 

19 director, or employee of, or partner in, 

20 a contract administrator or other 

21 service provider to the plan. 

22 ‘‘(II) LIMITED EXCEPTION FOR

23 PROVIDERS OF SERVICES SOLELY ON

24 BEHALF OF THE SPONSOR.—Officers 

25 or employees of a sponsor which is a 


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1 service provider (other than a contract 

2 administrator) to the plan may be 

3 members of the board if they con4 stitute not more than 25 percent of 

5 the membership of the board and they 

6 do not provide services to the plan 

7 other than on behalf of the sponsor. 

8 ‘‘(III) TREATMENT OF PRO9 VIDERS OF MEDICAL CARE.—In the 

10 case of a sponsor which is an associa11 tion whose membership consists pri12 marily of providers of medical care, 

13 subclause (I) shall not apply in the 

14 case of any service provider described 

15 in subclause (I) who is a provider of 

16 medical care under the plan. 

17 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

18 Clause (i) shall not apply to a small busi19 ness health plan that is in existence on the 

20 date of the enactment of this Act. 

21 ‘‘(B) PLAN ADMINISTRATOR.—The require22 ments of this section are met with respect to 

23 section 7705 professional employer organiza24 tions if the requirements of subsections (a) and 

25 (b) of section 804 have been met. 


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1 ‘‘(C) SOLE AUTHORITY.—The board or 

2 plan administrator has sole authority under the 

3 plan to approve applications for participation in 

4 the plan and to contract with insurers. 

5 ‘‘(c) TREATMENT OF FRANCHISES.—In the case of 

6 a group health plan that is established and maintained 

7 by a franchisor for the benefit of the employees of the 

8 franchisor and its franchisees, by multiple franchisors for 

9 the benefit of the employees of such franchisors and their 

10 franchisees, or by multiple franchisees for the benefit of 

11 the employees of such franchisees— 

12 ‘‘(1) the requirements of subsection (a) and sec13 tion 801(a) shall be deemed met if such require14 ments would otherwise be met if all franchisors or 

15 franchisees establishing and maintaining such plan, 

16 as applicable, were deemed to be the sponsor de17 scribed in section 801(b) and each employee of such 

18 franchisors or franchisees, as applicable, were 

19 deemed to be a member of the sponsor described in 

20 section 801(b); 

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

22 be deemed met; and 

23 ‘‘(3) the establishment and maintenance of such 

24 a group health plan shall not cause any one or more 

25 franchisor or franchisee employers participating in 


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1 such a group health plan to be treated as the em2 ployer, co-employer, or joint employer of the employ3 ees of another participating franchisor or franchisee 

4 employer for any purpose. 

5 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE6 MENTS. 

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

8 requirements of this subsection are met with respect to 

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

10 plan— 

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

12 ‘‘(A) a member of the sponsor; 

13 ‘‘(B) the sponsor; or 

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

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

16 a professional association or other individual17 based association, if at least one of the officers, 

18 directors, or employees of an employer, or at 

19 least one of the individuals who are partners in 

20 an employer and who actively participates in 

21 the business, is a member or such an affiliated 

22 member of the sponsor, participating employers 

23 may also include such employer; and 


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1 ‘‘(2) all individuals commencing coverage under 

2 the plan after certification under this part must 

3 be— 

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

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

6 employees of, or partners in, participating em7 ployers; or 

8 ‘‘(B) the dependents of individuals de9 scribed in subparagraph (A). 

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

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

13 no participating employer may provide health insurance 

14 coverage in the individual market for any employee not 

15 covered under the plan, if such exclusion of the employee 

16 from coverage under the plan is based on a health status17 related factor with respect to the employee and such em18 ployee would, but for such exclusion on such basis, be eligi19 ble for coverage under the plan. 

20 ‘‘(c) PROHIBITION OF DISCRIMINATION AGAINST EM21 PLOYERS AND EMPLOYEES ELIGIBLE TO PARTICIPATE.— 

22 The requirements of this subsection are met with respect 

23 to a small business health plan if— 

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

25 meeting the requirements of subsections (a) and (b) 


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1 are eligible to qualify as participating employers for 

2 all geographically available coverage options, unless, 

3 in the case of any such employer, participation or 

4 contribution requirements of the type referred to in 

5 section 2705 of the Public Health Service Act are 

6 not met; 

7 ‘‘(2) information regarding all coverage options 

8 available under the plan is made readily available to 

9 any employer eligible to participate; and 

10 ‘‘(3) the applicable requirements of sections 

11 701, 702, and 703 are met with respect to the plan. 

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

13 DOCUMENTS, CONTRIBUTION RATES, AND 

14 BENEFIT OPTIONS. 

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

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

17 the following requirements are met: 

18 ‘‘(1) CONTENTS OF GOVERNING INSTRU19 MENTS.— 

20 ‘‘(A) IN GENERAL.—The instruments gov21 erning the plan include a written instrument 

22 which— 

23 ‘‘(i) provides that the board of trust24 ees or plan administrator serves as the 

25 named fiduciary required for plans under 


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1 section 402(a)(1) and serves in the capac2 ity of a plan administrator (referred to in 

3 section 3(16)(A)); and 

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

5 plan is to serve as plan sponsor (referred 

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

7 ‘‘(B) DESCRIPTION OF MATERIAL PROVI8 SIONS.—The terms of the health insurance cov9 erage (including the terms of any individual 

10 certificates that may be offered to individuals in 

11 connection with such coverage), if any, describe 

12 the material benefit and rating, and other pro13 visions set forth in this section and such mate14 rial provisions are included in the summary 

15 plan description. 

16 ‘‘(2) CONTRIBUTION RATES MUST BE NON17 DISCRIMINATORY.—The contribution rates for any 

18 participating small employer shall not vary on the 

19 basis of any health status-related factor in relation 

20 to employees of such employer or their beneficiaries 

21 and shall not vary on the basis of the type of busi22 ness or industry in which such employer is engaged, 

23 subject to the terms of this title. 

24 ‘‘(3) EXCEPTIONS REGARDING SELF-EMPLOYED

25 AND LARGE EMPLOYERS.— 


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1 ‘‘(A) SELF-EMPLOYED.—Small business 

2 health plans with participating employers who 

3 are self-employed individuals (and their depend4 ents) shall enroll such self-employed partici5 pating employers in accordance with rating 

6 rules that do not violate the rating rules for 

7 self-employed individuals in the State in which 

8 such self-employed participating employers are 

9 located. 

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

11 health plans with participating employers that 

12 are larger than small employers (as defined in 

13 section 809(a)) shall enroll such large partici14 pating employers in accordance with rating 

15 rules that do not violate the rating rules for 

16 large employers in the State in which such large 

17 participating employers are located. 

18 ‘‘(4) REGULATORY REQUIREMENTS.—Such 

19 other requirements as the Secretary determines are 

20 necessary to carry out the purposes of this part, 

21 which shall be prescribed by the Secretary by regula22 tion. 

23 ‘‘(b) DOMICILE AND NON-DOMICILE STATES.— 

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

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1 ness health plan in the State in which the sponsor’s 

2 principal place of business is located. 

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

4 a State (other than the domicile State) in which par5 ticipating employers of a small business health plan 

6 are located but in which the insurer of the small 

7 business health plan in the domicile State is not yet 

8 licensed, the following shall apply: 

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

10 the expiration of the 180-day period following 

11 the submission of a licensure application by 

12 such insurer (that includes a certified copy of 

13 an approved licensure application as submitted 

14 by such insurer in the domicile State) to such 

15 State, such State has not approved or denied 

16 such application, such State’s health insurance 

17 licensure laws shall be temporarily preempted 

18 and the insurer shall be permitted to operate in 

19 such State, subject to the following terms: 

20 ‘‘(i) APPLICATION OF NON-DOMICILE

21 STATE LAW.—Except with respect to licen22 sure, the laws and authority of the non23 domicile State shall remain in full force 

24 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 

5 upon the occurrence of either of the fol6 lowing: 

7 ‘‘(I) APPROVAL OR DENIAL OF

8 APPLICATION.—The approval or de9 nial of an insurer’s licensure applica10 tion, following the laws and regula11 tions of the non-domicile State with 

12 respect to licensure. 

13 ‘‘(II) DETERMINATION OF MATE14 RIAL VIOLATION.—A determination by 

15 a non-domicile State that an insurer 

16 operating in a non-domicile State pur17 suant to the preemption provided for 

18 in this subparagraph is in material 

19 violation of the insurance laws (other 

20 than licensure of such State). 

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

22 Nothing in this paragraph shall be construed to 

23 prohibit a small business health plan or an in24 surer from promoting coverage prior to the ex25 piration of the 180-day period provided for in 


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1 subparagraph (A), except that no enrollment or 

2 collection of contributions shall occur before the 

3 expiration of such 180-day period. 

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

5 the application of the temporary preemption 

6 provision of this paragraph, nothing in this part 

7 shall be construed to limit the requirement that 

8 insurers issuing coverage to small business 

9 health plans shall be licensed in each State in 

10 which the small business health plans operate. 

11 ‘‘(D) SERVICING BY LICENSED INSUR12 ERS.—Notwithstanding subparagraph (C), the 

13 requirements of this subsection may also be sat14 isfied if the participating employers of a small 

15 business health plan are serviced by a licensed 

16 insurer in that State, even where such insurer 

17 is not the insurer of such small business health 

18 plan in the State in which such small business 

19 health plan is domiciled. 

20 ‘‘SEC. 806. REQUIREMENTS FOR APPLICATION AND RE21 LATED REQUIREMENTS. 

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

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

24 shall pay to the Secretary at the time of filing an applica25 tion for certification under this part a filing fee in the 


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1 amount of $5,000 which shall be made available to the 

2 Secretary, for the sole purpose of administering the certifi3 cation procedures applicable with respect to small business 

4 health plans. 

5 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA6 TION FOR CERTIFICATION.—An application for certifi7 cation under this part meets the requirements of this sec8 tion only if it includes, in a manner and form which shall 

9 be prescribed by the applicable authority by regulation, at 

10 least the following information: 

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

12 and addresses of— 

13 ‘‘(A) the sponsor; and 

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

15 or the plan administrator of the plan. 

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

17 BUSINESS.—The States in which participants and 

18 beneficiaries under the plan are to be located and 

19 the number of participants and beneficiaries ex20 pected to be located in each such State. 

21 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro22 vided by the board of trustees that the bonding re23 quirements of section 412 will be met as of the date 

24 of the application or (if later) commencement of op25 erations. 


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1 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu2 ments governing the plan (including any bylaws and 

3 trust agreements), the summary plan description, 

4 and other material describing the benefits that will 

5 be provided to participants and beneficiaries under 

6 the plan. 

7 ‘‘(5) AGREEMENTS WITH SERVICE PRO8 VIDERS.—A copy of any agreements between the 

9 plan, health insurance issuer, and contract adminis10 trators and other service providers. 

11 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

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

13 small business health plan shall not be effective unless 

14 written notice of such certification is filed with the appli15 cable State authority of each State in which the small 

16 business health plans operate. 

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

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

19 descriptions of material changes in any information which 

20 was required to be submitted with the application for the 

21 certification under this part shall be filed in such form 

22 and manner as shall be prescribed by the applicable au23 thority by regulation. The applicable authority may re24 quire by regulation prior notice of material changes with 


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1 respect to specified matters which might serve as the basis 

2 for suspension or revocation of the certification. 

3 ‘‘SEC. 807. NOTICE REQUIREMENTS FOR VOLUNTARY TER4 MINATION. 

5 ‘‘(a) IN GENERAL.—A small business health plan 

6 which is or has been certified under this part may termi7 nate (upon or at any time after cessation of accruals in 

8 benefit liabilities) only if the board of trustees, or the plan 

9 administrator, not less than 60 days before the proposed 

10 termination date— 

11 ‘‘(1) provides to the participants and bene12 ficiaries a written notice of intent to terminate stat13 ing that such termination is intended and the pro14 posed termination date; 

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

16 of the plan in connection with such termination in 

17 a manner which will result in timely payment of all 

18 benefits for which the plan is obligated; and 

19 ‘‘(3) submits such plan in writing to the appli20 cable authority. 

21 ‘‘(b) REGULATIONS.—Actions required under this 

22 section shall be taken in such form and manner as may 

23 be prescribed by the applicable authority by regulation. 


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1 ‘‘SEC. 808. IMPLEMENTATION AND APPLICATION AUTHOR2 ITY BY SECRETARY. 

3 ‘‘The Secretary shall, through promulgation and im4 plementation of such regulations as the Secretary may 

5 reasonably determine necessary or appropriate, and in 

6 consultation with a balanced spectrum of effected entities 

7 and persons, modify the implementation and application 

8 of this part to accommodate with minimum disruption 

9 such changes to State or Federal law provided in this part 

10 and the (and the amendments made by such Act) or in 

11 regulations issued thereto. 

12 ‘‘SEC. 809. DEFINITIONS AND RULES OF CONSTRUCTION. 

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

14 ‘‘(1) AFFILIATED MEMBER.—The term ‘affili15 ated member’ means, in connection with a sponsor— 

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

17 be a member of the sponsor but who elects an 

18 affiliated status with the sponsor, or 

19 ‘‘(B) in the case of a sponsor with mem20 bers which consist of associations, a person who 

21 is a member or employee of any such associa22 tion and elects an affiliated status with the 

23 sponsor. 

24 ‘‘(2) APPLICABLE STATE AUTHORITY.—The 

25 term ‘applicable State authority’ means, with respect 

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1 surance commissioner or official or officials des2 ignated by the State to enforce the requirements of 

3 title XXVII of the Public Health Service Act for the 

4 State involved with respect to such issuer. 

5 ‘‘(3) FRANCHISOR; FRANCHISEE.—The terms 

6 ‘franchisor’ and ‘franchisee’ have the meanings given 

7 such terms for purposes of sections 436.2(a) 

8 through 436.2(c) of title 16, Code of Federal Regu9 lations (including any such amendments to such reg10 ulation after the date of enactment of this part). 

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

12 health plan’ has the meaning provided in section 

13 733(a)(1). 

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

15 term ‘health insurance coverage’ has the meaning 

16 provided in section 733(b)(1), except that such term 

17 shall not include excepted benefits (as defined in sec18 tion 733(c)). 

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

20 ‘health insurance issuer’ has the meaning provided 

21 in section 733(b)(2). 

22 ‘‘(7) INDIVIDUAL MARKET.— 

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

24 market’ means the market for health insurance 


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1 coverage offered to individuals other than in 

2 connection with a group health plan. 

3 ‘‘(B) TREATMENT OF VERY SMALL

4 GROUPS.— 

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

6 (ii), the term ‘individual market’ includes 

7 coverage offered in connection with a 

8 group health plan that has fewer than 2 

9 participants as current employees or par10 ticipants described in section 732(d)(3) on 

11 the first day of the plan year. 

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

13 shall not apply in the case of health insur14 ance coverage offered in a State if such 

15 State regulates the coverage described in 

16 such clause in the same manner and to the 

17 same extent as coverage in the small group 

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

19 the Public Health Service Act) is regulated 

20 by such State. 

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

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

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

24 ‘participating employer’ means, in connection with a 

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1 dividual who is an employee of such employer, a 

2 partner in such employer, or a self-employed indi3 vidual who is such employer (or any dependent, as 

4 defined under the terms of the plan, of such indi5 vidual) is or was covered under such plan in connec6 tion with the status of such individual as such an 

7 employee, partner, or self-employed individual in re8 lation to the plan. 

9 ‘‘(10) SECTION 7705 PROFESSIONAL EMPLOYER

10 ORGANIZATION.—The term ‘section 7705 profes11 sional employer organization’ means an organization 

12 providing services for a customer pursuant to a con13 tract meeting the conditions of subparagraphs (A) 

14 through (E) of subsection (e)(2) of section 7705 of 

15 the Internal Revenue Code of 1986, without regard 

16 to subsection (a) of such section. Such term includes 

17 an entity that is part of a controlled group or is 

18 under common control with respect to a section 

19 7705 professional employer organization (within the 

20 meaning of section 414 of such Code). Solely for 

21 purposes of this part, references in this part to 

22 ‘member’ shall include such a customer of a section 

23 7705 professional employer organization except as 

24 applied to references to ‘member’ or ‘members’ in 


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1 paragraph (1) of this subsection (relating to the def2 inition of affiliated member). 

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

5 respect to a plan year, has the meaning given the 

6 term ‘small business concern’ in the Small Business 

7 Act. 

8 ‘‘(b) RULE OF CONSTRUCTION.—For purposes of de9 termining whether a plan, fund, or program is an em10 ployee welfare benefit plan which is a small business 

11 health plan, and for purposes of applying this title in con12 nection with such plan, fund, or program so determined 

13 to be such an employee welfare benefit plan— 

14 ‘‘(1) in the case of a partnership, the term ‘em15 ployer’ (as defined in section 3(5)) includes the part16 nership in relation to the partners, and the term 

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

18 partner in relation to the partnership; and 

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

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

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

22 include such individual. 

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

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

25 business health plan shall not be deemed to be a plan 


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1 sponsor in applying requirements relating to coverage re2 newal.’’. 

3 (e) CONFORMING AMENDMENTS TO PREEMPTION

4 RULES.— 

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

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

7 following new subparagraph: 

8 ‘‘(E) Subparagraphs (A) through (D) do not apply 

9 with respect to any State law in the case of a small busi10 ness health plan which is certified under part 8.’’. 

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

12 is amended— 

13 (A) in subsection (b)(4), by striking ‘‘Sub14 section (a)’’ and inserting ‘‘Subsections (a) and 

15 (d)’’; 

16 (B) in subsection (b)(5)— 

17 (i) in subparagraph (A), by striking 

18 ‘‘subsection (a)’’ and inserting ‘‘subsection 

19 (a) of this section and subsections 

20 (a)(2)(B) and (b) of section 804’’; and 

21 (ii) in subparagraph (B), by striking 

22 ‘‘subsection (a)’’ and inserting ‘‘subsection 

23 (a) of this section or subsection (a)(2)(B) 

24 or (b) of section 805’’; 


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1 (C) by redesignating subsection (d) as sub2 section (e); and 

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

4 following new subsection: 

5 ‘‘(d) Except as provided in subsection (b)(4), the pro6 visions of this title shall supersede any and all State laws 

7 insofar as they may now or hereafter preclude a health 

8 insurance issuer from offering health insurance coverage 

9 to a small business health plan sponsor that is certified 

10 under part 8.’’. 

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

12 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

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

14 person serving as the sponsor of a small business health 

15 plan under part 8.’’. 

16 (g) SAVINGS CLAUSE.—Section 731(c) of such Act 

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

18 (h) CLERICAL AMENDMENT.—The table of contents 

19 in section 1 of the Employee Retirement Income Security 

20 Act of 1974 is amended by inserting after the item relat21 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. 

‘‘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. 


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‘‘808. Implementation and application authority by Secretary. 

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

1 SEC. 3. COOPERATION BETWEEN FEDERAL AND STATE AU2 THORITIES. 

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, 

23 as the State with which consultation is required. In 


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1 carrying out this paragraph such State shall be the 

2 domicile State, as defined in section 805(b).’’. 

3 SEC. 4. EFFECTIVE DATE AND TRANSITIONAL AND OTHER 

4 RULES. 

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

6 this Act shall take effect 1 year after the date of the enact7 ment of this Act. The Secretary of Labor shall first issue 

8 all regulations necessary to carry out the amendments 

9 made by this Act within 6 months after the date of the 

10 enactment of this Act. 

Æ 


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